Address in Reply to Her Majesty's Most Gracious Speech

HL Deb 07 December 2000 vol 620 cc32-92

3.3 p.m.

Debate resumed on the Motion moved yesterday by the Lord Graham of Edmonton—namely, That an humble Address be presented to Her Majesty as follows:

"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament".

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)

My Lords, since 1997, the Government's priorities have been to build a strong and dynamic economy and a fair society. In May 1997 we inherited 18 years of boom and bust, which gave us a perpetually devaluing currency as the sole means of enhancing competitiveness. The country was heavily in debt. We were spending more on interest payments than we were on our entire schools programme. Nearly half of government spend was on redeeming the national debt and paying benefits. Since 1979 social security expenditure had doubled, but so had poverty. Inflation was returning; business confidence had been battered by inflation; the productivity gap with our competitors was growing; and hard-working families had been hurt by high interest rates, unemployment and house repossessions.

We took action to lock in low inflation and to cut government debt. We made the Bank of England independent; and we eliminated the deficit. Government borrowing has been reduced by £44 billion in total since the election. Inflation is at its lowest level for 30 years. We have a higher level of business investment as a share of our economy than at any time in 40 years and long-term interest rates are around the lowest for 30 years.

But, as the Chancellor of the Exchequer said, this was for a purpose. A strong economy is the underpinning of a more fair and just society because, crucially, a strong economy expands the labour market. We know that the only secure route out of poverty is to be in work. We know that the only sure way to overcome social exclusion is to be in work. It is not acceptable for our people—inner-city youngsters, lone parents, ethnic minorities, carers, disabled people, men coming from manual trades who have been made redundant in their fifties—to be marginalised into a life lived barely bumping along for years at a time on income support, eked out by occasional forays into undeclared and illicit casual labour.

For those of working age, we want a moral economy based on work, offering prosperity, dignity, fairness and inclusiveness, not a black economy based on social security benefits, yielding only poverty, fiddling, scrounging and social exclusion—a moral economy, not a black economy. That is no way to live, and no way for us to bring up our children. A week may be a long time in politics, but it is endless for children and their parents as they survive—barely—until the next benefit giro.

So I am delighted to tell the House that over 1.1 million more men and women are in work than in 1997. Claimant unemployment is at its lowest rate since Oct 1975, and through our New Deals we are effectively reaching out to those who for too long have been the somewhat edgy observers of other people's good life. A quarter of a million young people have come into work through the New Deal. We are also reaching out to those who are not unemployed in conventional claimant terms, but who are instead the hidden unemployed, the economically inactive, carers, unemployed partners and, above all, lone parents and disabled people—people who very often want to work but who were ignored for a generation, given income support or a disability benefit in order to help massage the unemployment figures.

Only 40 per cent of lone mothers work, whereas 70 per cent of couple mothers work. We know why. It is not about not wanting to work: it is about childcare; it is about education and training; and it is about health and self-esteem. Above all, it is about knowledge of the labour market because you have a partner already in work. Hence the success of our New Deal for lone parents, whose personal advisers have helped nearly 200,000 lone parents to build their future.

Perhaps I may trespass on the time of the House to tell your Lordships about one lone parent in her thirties, with learning difficulties and two children—someone who had never ever had a proper job. Indeed, given her disabilities, she seemed never likely to have one. Her adviser went with her for four Saturdays running to a hygiene course. With her adviser's help, that disabled lone parent is now working in a butcher's shop. For the first time in her life, to her delight, she is holding down a job, supporting her children and living a full, adult life. That New Deal is personally tailored to meet the needs of each client. It is about developing potential and overcoming barriers to work. However, lone parents do not know what they do not know. They cannot make choices when they do not know what opportunities are available to them. In future, the new compulsory work-focused personal adviser meetings for all lone parents will bring them within the knowledge economy. I trust that that will springboard them and their children out of a lifetime in poverty.

We also know that disabled people are seven-times as likely as non-disabled people to be out of work and claiming benefits. Yet 1 million disabled people say that they would like to work, and 400,000 believe that they could work given the right support. Hence our New Deal for disabled people, in conjunction with the Department for Education and Employment. Our pilot schemes have already helped over 5,000 disabled people into work. Early intervention is essential. That is why we are now rolling out nationally a programme of job brokers to offer people receiving incapacity benefit the support and guidance that they need to find paid work.

Carers shoulder responsibilities with enormous courage and grace. They, too, often find themselves edged out of the labour market and then, five or 10 years later, find it very hard to re-enter work. That is why I am so delighted that we were able to unveil just a few weeks ago what I believe to be the best ever package of support for carers. We were able not only significantly to increase the carers premium for those who are in receipt of income support and not in work, but also to extend that premium for the first time to pensioners in that situation. We also raised the earnings ceiling for those on invalid carers' allowance so that they can not only earn more and keep more but for the first time come within the national insurance system.

Lone parents, carers, disabled people, for all of these, we have, crucially, ensured that work pays. In the past entry wages have not always floated people above benefit levels. Therefore it is not entirely surprising that people have chosen to remain on benefit. Hence our minimum wage, which has benefited 1½ million people, mainly women; hence our working families' tax credit and disabled person's tax credit, which ensure a minimum weekly income substantially above benefit rates. I give an example. A lone parent with one child on benefit gets £123 a week from income support or JSA; working 35 hours per week at minimum wage levels only, together with working families' tax credit and child benefit, she earns £210 per week: £123 on benefit, £210 in work.

But she will not be better off if that difference goes on childcare. Hence, too, our childcare allowance within working families' tax credit and our national childcare strategy to support lone parents who want to work but, given childcare costs and the lack of a supporting partner, could not otherwise afford to do so.

These are men and women of working age who for the most part can and should be re-included in the labour market: not just lone parents, disabled people and carers, but also young people, the long-term unemployed, the unemployed over 50, the inactive partner in a workless couple—all those who tend to remain beached as the tide of economic prosperity floats the rest of us into a good quality life.

We know that to be in work and in a pension scheme at the age of 25 is the best possible preparation for a comfortable old age. But there are those who are already pensioners or approaching retirement who have no access to a decent occupational pension. The House will recall our work over the past two major social security Bills to reform SERPS into a state second pension which will give double the pension that SERPS would have done to a low earner and for the first time ever give second pensions to carers and disabled people. Alongside that we have proposed stakeholder pensions for those on modest incomes.

But, of course, it takes years for the benefits of a new pension scheme to roll up. In the meantime, we face the problem that some existing pensioners are poor now and cannot, of course, improve their situation. That is why we have increased the minimum income guarantee by nearly £20 a week to £140 for a couple next April and why we are committed to raising it to £100 a week for a single pensioner. As MIG is earnings related, our poorest pensioners will not fall behind national prosperity in future.

Those who fail to qualify for MIG usually have either capital or income just above the limit. They feel, rightly, that their saving and hard work are being penalised. That is why we have lifted the savings cap from £8,000 to £12,000 and why from 2003 we are introducing the pension credit. The average occupational pension in this country is £44 a week; the pension credit will benefit those with occupational pensions of up to £55 a week. As the pension credit is earnings linked, again it will ensure that those with a modest pension wrapped around in the pension credit remain above MIG. In that context I am so pleased that we have been able to address the appalling blunder of inherited SERPS—existing pensioners will know that their spouse will inherit their full SERPS on widowhood.

All this is on top of the biggest increase, £5 and £8 a week, in the state pension since July 1974, the first budget of the 1974 Labour government, more than 25 years ago. We want all pensioners to share in rising national income. Next year we will be spending £4.5 billion a year extra in real terms on pensioners as a result of our policies since 1997. By 2002–03 this will rise to over £5 billion; that is £3 billion more than if the basic state pension had been linked to earnings since April 1998.

Most people of working age are not poor, though some—those on benefit for a long time—are; hence our work to reconnect them with the labour market. Most pensioners are not poor, though some are; hence our pensions reforms. However, the face of poverty in this country is not that of a pensioner, not that of an unemployed working man, not that of someone who is disabled; it is instead the face of a child. In my view, one of the most shameful stains on our society bequeathed us by the previous government was the growth in child poverty. One million children were poor in 1979; nearly 4 million children in 1997. That is one child in three. The poorest children of all are the children of lone parents, who are two or three times more likely to suffer prolonged poverty than other children. They are particularly likely to be poor for two reasons. They are poor because their mother is unlikely to be in work—hence our new deals—and they are poor because they are in a fractured family and are unlikely to be receiving child support; hence our reforms of the Child Support Agency last summer to ensure that 1 million more children get the maintenance that they should. But we need to do more.

Measures announced in our first four Budgets will lift over a million children out of poverty. Tax and benefit changes together will mean that by April 2001 all families with children will, on average, be bet ter off by more than £15 per week and severely disabled children by more even than that. I give one statistic. The income support rate for a child under 11 was some £16 in 1997; from next April it will be about £32, nearly double that—just think, doubling the income support rates for children under 11 in one Parliament. The Prime Minister is determined that we shall eradicate child poverty in 20 years and halve it in 10. To my delight we are on target to achieve that.

As we know, the poverty that scars is the poverty that persists, which is why the Sure Start programme for children will, I hope and believe, break the all too usual link between poverty and poor outcomes for children. Our Sure Start programmes now number over 100; by 2004 they will number over 500, embracing well over a third of all poor children in the country. We shall not know the results for 10 or perhaps 20 years—whether those children enjoy improved health and suffer less injury; do better at school; avoid truancy, petty crime and teenage pregnancy; and find jobs. It is an act of faith in the future of our children, but one which I am confident every Member of this House will endorse.

But we shall do more. From 2003 we shall introduce an integrated child credit which will bring together the different strands of support for children currently available in working families' tax credit, disabled person's tax credit, income support and children's tax credit—a kind of basic citizen's income for children which can be ported from benefit to work without penalty. This will be backed up by an employment tax credit which will broadly replicate the support currently provided to adults in WFTC.

So we are using the strength of our economy to rebuild the welfare state: helping adults of working age to re-engage with the labour market; ensuring that pensioners share fairly in the rise in national prosperity; and lifting children out of a poverty that can scar them for life. But that welfare state has to have the confidence of the people it supports and serves. It cannot do that if it is itself not secure against fraud.

We spend over £100 billion each year on social security and we know that social security fraud costs at least £2 billion a year and perhaps much more. We owe it to the country as a whole, and in particular to the vast majority of people who claim benefits honestly, to drive fraud out of the system.

For the first time we have set out a comprehensive plan to secure the system from the first claim to the final payment by investing in information technology; by paying benefits directly into bank accounts by 2003—this is not only cheaper but will also eliminate almost at a stroke £140 million a year of fraud in lost order books and giros—and by setting up a national intelligence unit to make better use of our information and cross-checking of information held on different computer systems. This has already saved us £150 million.

We have set a target for reductions in fraud and error in the system so that people can judge our success for themselves. We aim to reduce fraud and error on income support and jobseeker's allowance by 25 per cent by March 2004 and by 50 per cent by March 2006. We are winning. New figures released last week showed the first fall in fraud since measurements began.

Lord Randall of St Budeaux

My Lords, I have found my noble friend's speech fascinating, but she has not mentioned the impact that her broad policy base will have on families and the welfare of the family unit. Might not pressuring women to go out to work undermine family units, and particularly the well-being of children, which she has referred to?

Baroness Hollis of Heigham

No, my Lords, the New Deal for unemployed partners is for those under 45 without children. I do not subscribe to the view that when a couple are living together, married or not, the woman is a dependant to the extent that, if the man claims benefit, she also gets benefit as his dependant, without any suggestion that she, as a moral adult, has a right to enter the labour market. The programme applies only to those without children. I entirely agree with my noble friend that bringing up children is one of the most important jobs that any of us can do.

We are seeking to support families and to reform the welfare state, but we need to strengthen it against fraud. We have done much, but more needs to be done. The Government asked my noble friend Lord Grabiner to investigate the informal economy. His report made several recommendations on what more could be done to tackle benefit fraud. To implement those proposals, we need additional legislative powers.

As announced in the gracious Speech, the Government will introduce a social security fraud Bill, principally aimed at implementing two of the recommendations. First, we must do more to protect the system against people who deliberately lie about their real circumstances in order to receive benefit. Secondly, there is a problem with people who commit repeated fraud. We propose that those convicted of benefit fraud will be warned that a further conviction will lead to the withdrawal or reduction of certain benefits for 13 weeks. There will be a fallback scheme to pay a reduced level of benefit to prevent hardship. We believe that the checking of information and the measures to deal with people who have committed repeated fraud will help us to eradicate the fraud that saps confidence in the integrity of our welfare state. Pensioners in particular will not claim the benefit that they should have if they see others claiming when they should not. It stigmatises and corrupts the entire welfare system.

In conclusion, government can make a difference. We have delivered the right economic conditions for steady growth and full employment. As a result we have saved £8 billion on unemployment benefits. That money is therefore available to be spent where it is most needed—on tackling poverty and social exclusion. That in turn contributes to sustainable and sustained growth in the economy.

I remind the House that we have brought 1 million children out of poverty. Since 1997, long-term unemployment has gone down by 60 per cent and youth unemployment has gone down by 75 per cent—both to the lowest figures since the mid-1970s. We have implemented a New Deal of tailored individual support for those excluded from the labour market. We have introduced a new minimum wage, supported by the working families' tax credit. The new disabled person's tax credit works alongside the Disability Rights Commission. We have also introduced significant support for carers and provided an extra £8.5 billion for pensioners, as well as creating a structure for a new pensions system.

All that has been done within one Parliament. It has been made possible by the secure and steady growth of the economy, which allows us to invest in our people, not to leave them stranded on the edges of our society. I look forward to the next Parliament—whenever that will be—as, I am sure, do the people of this country. I am proud to say that we have truly made a difference.

3.25 p.m.

Lord Higgins

My Lords, it has been said that some are born great, some achieve greatness and some have greatness thrust upon them—a classification which may be appropriate in your Lordships' House. When I was given the privilege of opening for the Opposition in today's debate, it seemed pretty clear to me that I came into the third category. I have been a Member of your Lordships' House for only three years and I still regard myself as a newcomer, although more than a quarter of your Lordships' House have arrived here since I was appointed and for a not insignificant number this is their first Queen's Speech.

The Minister's speech was unusually aggressive, reflecting the thinness of the Queen's Speech. However, no doubt the Speech will present your Lordships with a lot of hard work.

A few days ago, I spoke to a former colleague in another place. He said, "You wouldn't like it here now. All that happens is we have a Second Reading; if the matter is at all controversial it is guillotined; and then we leave your Lordships' House to sort the matter out".

Tradition is important in this House. I think that our arrangements for debating and voting in Committee, on Report and at Third Reading are better than those in the House of Commons. However, I hope that we can dispose of one tradition—the occasional debates off the Floor of the House in the Moses Room. With its diabolical acoustics, its inadequate light and its most inappropriate layout, I find the Moses Room unacceptable. Moses himself would have had difficulty getting the Ten Commandments right if he had had to perform there. If we are to have debates off the Floor of the House, I hope that some better arrangement can be made.

The Government put spin before substance. That way of operating is implemented by a process of constant repetition of their proposals. First there is a leak, then another leak, then an announcement, a reannouncement and another reannouncement.

That process of leaking is objectionable. Hitherto, two aspects of our activities have been exempt from it. The first is the Budget. The Chancellor has got over that by announcing the leaks en masse in the Pre-Budget Statement. More particularly, there have not generally been leaks of the Queen's Speech, but that was certainly not the case this year. Almost every item of the Queen's Speech was leaked in advance in great detail. I have one press report here that begins: Measures for curfews on young teenagers … will be included … in the Queen's Speech on Wednesday". The process clearly has official endorsement. A report in The Times a week or so ago said: Tony Blair will today announce plans to rip up, reform and simplify a score of costly or unnecessary regulations that hold back small firms. … He will announce that the Queen's Speech will include a deregulation Bill covering rules on", this, that and the other. The report continues with the details. The Prime Minister's spin doctors are clearly not happy with policies being announced first in the Queen's Speech. That is an unfortunate development, but it is typical of the way in which the Government have put forward their proposals.

The benefit fraud inspection Bill to which the noble Baroness referred is a classic case of how the Government have operated. Sometimes, the succession of announcements is followed by activity, but not infrequently nothing happens. In 1997, the Labour manifesto promised measures to deal with benefit fraud. Labour pledged to crack down on dishonesty in the benefits system. In 1998, those objectives were reiterated in a Green Paper on welfare. In 1999 the Government launched their formal strategy for tackling benefit fraud and in July 2000 they issued a further publication of consultation documents. Now we are told that there is to be a Bill in the Queen's Speech. We shall believe it when it happens. The Bill to which the noble Baroness referred was mentioned in last year's Queen's Speech. This proposal was in the last Labour manifesto and is likely to turn up in the next manifesto of the Labour Party.

Despite the importance of the issue to which the noble Baroness rightly referred, so far virtually nothing whatever has happened. However, if such a measure is introduced, it will undoubtedly impose more burdens on business. A feature of the Government's policy has been that almost everything they have done has imposed more and more burdens on business and industry. That is likely to be the case so far as concerns the fraud Bill; DSS estimates suggest that such a burden may amount to a substantial sum. Indeed, in addition to the burden imposed by the department, local authorities will impose more.

Time and time again the Government have imposed burdens on industry, and time and again we have been told that measures will be taken to reduce those burdens. However, there is not the slightest doubt that the burdens on industry have vastly exceeded—and after this regulation Bill will still vastly exceed—any measures which are likely to improve the situation. I give as an example the working families' tax credit, wrongly classified as a tax cut and not a benefit. In addition, the stakeholder pension is thought to impose costs of approximately £1.6 billion per year on industry. The CBI estimates that the cost of red tape over the Parliament amounts to well over £12 billion. That is a substantial burden and it is undermining the ability of industry to improve its own productivity.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, I thank the noble Lord for giving way. Does he agree that the great majority—indeed, all but about £10 million to £14 million—of that figure is accounted for by benefits and not red tape? If he regards that as waste, will he say which of the benefits a future Conservative government would get rid of?

Lord Higgins

My Lords, I do not accept that at all. If the noble Lord had been present during our debates on the Welfare Reform arid Pensions Act or the Child Support Act and had taken note of the amendments moved by my noble friend Lord Astor of Hever on those occasions, he would know that many of those impositions arise directly in the form of red tape of one sort or another. I cite as examples the payroll burdens on owner-managers, the working families' tax credit, the responsibility for repaying student loans, the imposition of the stakeholder pension and so on. I draw attention to the figures which have been widely quoted by the CBI. It is not simply a case of an increase in taxation, which has amounted to approximately £5 billion a year, but of the imposition of red tape and government's preoccupation with it.

I add one point in response to what the noble Lord said. It has been pointed out that since 1997 the Department of Trade and Industry has increased its running costs by approximately 25 per cent. Of course, if we are to have red tape, someone must tie it up. That is what has happened, and many recent reports by the CBI, the chambers of commerce and so on indicate that those bodies do not share the view which the noble Lord put forward in his intervention.

I turn to the question of pensions, referred to by the noble Baroness. She did not mention the role of occupational pensions. I declare an interest. As noble Lords know, I am chairman of an occupational pension scheme. Despite the lip service which the Government pay to occupational pensions—the fact that they represent a great achievement and so on—the reality is that, not least in the Chancellor of the Exchequer's first act and despite what was said in advance of the election with regard to changing corporation tax, approximately £5 billion has been taken away from occupational pension schemes. People did not understand that at the time, but I am happy to say that increasingly they understand it now.

I turn to the question of the state pension, again referred to briefly by the noble Baroness. I speak with some experience in this area because for more than 30 years I represented a constituency which had probably the oldest population in the country. I do not believe that my former constituents, or pensioners generally, will be misled by the attitude that the Government have taken with regard to the state pension. In their minds, a 75p rise given in a year some time before an election is not offset by a £5 rise the following year. So far as that is concerned, they are more sensible than to believe that they can trust this Government. Indeed, that view has been reflected time and again in the interventions of the noble Baroness, Lady Castle.

The noble Baroness, Lady Hollis, referred to the second state pension. That was introduced in direct conflict with the Government's manifesto statement that they would retain SERPS for those who wished to remain in that system.

My other point with regard to pensions is that the extension of means-testing by this Government has been enormous. Time and time again they have extended the way in which the means test has operated, and that has had a most serious effect. Under the previous government, means-testing was steadily reduced while payments to pensioners were steadily increased faster than to any other group in the country.

However, we now find that we are almost back to the position in 1979 with regard to means-testing. That has been spelt out clearly by authoritative bodies, such as the King's Fund which says that on the one hand the Government are spreading means-testing, which penalises modest savings, and, on the other hand, they are expecting people with modest incomes to save for their retirement. That simply will not work.

I am sure that the Government's spokesmen are perhaps a little fed up with Mr Frank Field, who said on 22nd September: Talk of a pensioner credit after the next election merely adds salt to the wound … because it will be means-tested it simply digs the Government deeper in the hole where their current means-tested strategy has landed them". The House of Commons Library—an authoritative source—says that by the time the Government's proposals come fully into effect in 2003, 55 per cent of pensioner households will be on means-tested benefits and 29 per cent of non-pensioner households will be on income-related benefits. That is not a satisfactory situation; nor do I believe that we should praise the Government's performance on the basis of the way in which more and more means-testing has become a crucial part of their programme. That has happened despite the fact that before the election Mr Gordon Brown and Mr Blair gave an assurance that their objective was to reduce means-testing, not to increase it.

My noble friend Lord Saatchi will deal with matters relating to the economy and, in particular, with the rather aggressive remarks at the beginning of the noble Baroness's speech. Although it is surely relevant, she made no reference to the fact that this Government inherited from their predecessors a vastly better economic situation than any government in living memory. The best that can be said about the Government's performance is that they have not ruined it so far.

Having said that, I believe that the reason why the economy, in the words of the noble Baroness, is stable is because the Government have imposed one stealth tax after another. Of course, if it is good news, it is announced by the Chancellor; if it is bad news, it is announced by the Department of Social Security. I see that the noble Baroness indicates assent.

Baroness Hollis of Heigham

My Lords, I was merely indicating amusement.

Lord Higgins

My Lords, the noble Baroness may find it funny, but we do not. Indeed, I doubt whether the noble Baroness does so either.

The Chancellor of the Exchequer made great play of the increase in social security benefits a little while ago. But there was no mention in the Chancellor's speech of the increase in contributions. In fact, people earning over £30,000 per year, which is a lot of people in the NHS, the police or whatever, will find that their national insurance contributions have increased by 7.5 per cent. That is far in excess of inflation.

When I asked the noble Baroness about that after the initial announcement, she said that that is a matter for the Treasury, although, of course, we all know that Members on that Front Bench opposite answer for the Government as a whole. She declined to spell out the extent to which the increase in benefit would be paid by an increase in contributions well over the rate of inflation. That is yet another example of a stealth tax.

I make one other point on the question of the economy which I believe is extremely important. The problem with a single currency is that the Government give up for all time the main means of adjusting for differential movements in costs and prices. That inevitably imposes very great strains. The larger the single currency area, the greater those strains are likely to be.

Two consequences are likely to flow: either there will be endemic unemployment in one part of the euroland area or another, depending on how differential costs and prices move—the fact that we have a "one size fits all" for both the exchange rate and the interest rate creates real problems—or there will have to be massive subvention from one part of the euroland area to another.

I find it deeply disturbing that among the matters which are apparently to be debated at the Nice Summit is a proposal which will force members to bail out countries suffering from economic problems which are generated by the fact that "one size fits all" and which will ensure that it is to be subsidised. I did not believe that that would happen but, apparently, there are to be more and more subsidies in order to compensate for the fact that some of the countries in euroland are unable to make the adjustments which they would otherwise make by moving their exchange rates. That is an extremely serious point indeed.

What, perhaps, is even more remarkable is that apparently—and Treasury officials seem to confirm this, as do officials in Brussels—it will be possible to use the proposals in the clause which is now being considered at Nice to deal with the kind of problems which I have suggested and that this country and its taxpayers will be liable to pay, even though we are not within the single currency. I hope that we can have an assurance from the Government that they will veto that proposal and will not expose the British taxpayer in the way I believe is proposed.

Finally, I thought that in preparation for this speech, I should carry out a little research. I discovered that the first occasion on which I spoke from the Front Bench on a Queen's Speech was 30 years ago, in 1970. Even more research revealed the fact that that was probably the last occasion when I made a speech from the Front Bench on a Queen's Speech until today, so there has been a rather long gap between one and the other.

However, the crucial point about the speech which I made 30 years ago—this is a good omen—is that I made it as a member of an incoming Conservative government who had won a general election when there was not a single opinion poll which believed that we could win; and not a single commentator who said that we might possibly win. We won by a majority of 40.

It is unlikely that I shall find myself on that Bench opposite in six months' time, but I believe that there is a very real possibility indeed that my noble friends behind me may find themselves sitting in six months' time not on these Benches but on the Benches opposite.

3.45 p.m.

Earl Russell

My Lords, first, I look forward very warmly to the maiden speech of the noble Lord, Lord Mitchell. Not many legends are true but the legend of this House's generosity to maiden speakers is one of the few that is. I remember it well. I look forward to enjoying what he has to say.

I am often surprised by what I read in the papers. I happened to read the first letter in the Independent today from Mr Andrew Tyrie who informs me that: Another hundred hereditary peers, retained at the Prime Minister's express wish, are cowering under threat of the axe". I thought that my family got over that in 1683, It is a condition which is very quickly cured. But perhaps I may say that if my activities here end in my replacement by somebody who has the legitimacy, through election, to challenge government more effectively than I have been able to do, no one will be more pleased than I.

I have been rather disturbed also by some of the commentary on the gracious Speech which indicates that 15 Bills is an indication of an incomplete Session. Lord Whitelaw used to say that 16 Bills in a full Session was an ample ration. If we have changed so much, it indicates that Stakhanovite values are taking over the legislative pipeline and while I yield to none in my respect of the late Aleksei Stakhanov, I do not believe that legislation was his proper vocation. So we need a little caution here.

I should also like to allow myself the luxury of' one sentence on hunting. I expect it to be the last on the issue that I speak this Session. I have no intention of casting any vote on that Bill. Should I be made to come down off that high horse, I should vote against whichever side proved itself to be more intolerant. That is an end of that subject.

To the noble Lord, Lord Higgins, I recommend the maxim of Mr Enoch Powell that an amateur in politics is one who predicts the results of the next general election. To the Minister, I recommend a slightly wider context. The noble Baroness drew attention to the beneficent state of the economy. Her Government have some share of the credit and I should be the first to congratulate them on having that share of the credit. But in the global economy as it is today, credit for the state of an economy cannot rest entirely on the shoulders of any one national government, however marvellous. Some share of the credit clearly must rest with the last Chancellor of the Exchequer; some must rest on the shoulders of Alan Greenspan and others; some must rest on the state of the global economy overall.

I ask the Minister to admit, before the next recession and not after, that the Government cannot claim the whole credit when things go right, any more than they should suffer the sole discredit when things go wrong. The sooner she makes that admission, the more painless it will be.

I also offer her some advice; that is, not to devote too much of her next general speech to a general assault on the previous government. It is partly that that tune is beginning to sound stale very quickly indeed and partly—and from the Minister's point of view, this is more serious—that it allows listeners to gain the impression that the next Conservative government would be no worse than the government of Mr Major. I believe that it would be extremely unwise for the government to allow that impression to spread. I shall return to that point shortly when I speak on the subject of single parents.

On the New Deal, not for the first time, I must implore the Minister to consider the statistical possibility of substitution: that some of the people who have acquired jobs through the New Deal replaced others who would have acquired those jobs if the New Deal had not succeeded in placing them in the jobs. As the New Deal has not created any new job, except in the management of the New Deal itself, I cannot see how some element of substitution can possibly be absent, although the Government resolutely refuse to consider the possibility. Until they do, their figures deserve not merely a pinch of salt but a salt cellar

Again the Minister repeated the usual new Labour mantra about work. I have great respect for work. I have a great desire to see more people in work. On the other hand, the Minister referred to "people making the choice to remain on benefit". I believe that that was her exact phrase and I believe that she was possibly jumping the gun. There are a large number of areas, of which Peckham and West Bromwich happen to be two, where the flow of jobs has not returned.

I have been listening to a good many voters in West Bromwich. They feel that it is an area about which everybody has forgotten and that life is ebbing out of it. I have listened to some strong homilies on that subject. Looking at the figures I cannot say that they are undeserved. Many people who are not in jobs come from those areas. It is essential to create jobs for which people can apply. When the Minister talks about the poverty of a life on benefit. I believe that inadvertently she concedes the poverty of the levels of benefits. Income support, of course, like the state pension, has been linked to prices and not to earnings.

I shall spare the Minister another homily on pensions. She knows what I think and I know what she thinks; I do not believe that we can go any further. However, I believe that she should bear in mind that the uprating of income support purely in line with prices has created great hardship. When she talks about sponging and fiddles being a result, she talks about that of which her Government are in part the author. It is a point that needs attention. It is not, as I am sure the Minister understands, a plea for the restoration of the earnings link, on which she knows my views; it is a plea for uprating above prices as resources allow, as unusually I believe that they do at present.

In a global economy we need to consider the primary purpose of the social security system. In my book, in a flexible labour market the primary purpose of that system is to keep people alive, fit and ready to return to work when they are between jobs, as for much of their lives inevitably they will be in work.

The Secretary of State should have on the desk in front of him the injunction of Charles II, Let not poor Nelly starve". The first thing that the social security system is about is the right to life. When I was a child and the 1945 government had recently come into office, I can remember being told that one of the main things that they were doing was to guarantee people against the risk of starvation through poverty. I do not look forward to that ceasing to be true.

The right to life is not a right that is contingent on responsibility, although it carries with it responsibilities. The right to life is a human right. In a country that rightly does not believe in the death penalty, it is not a right that is to be taken away because of a failure in any responsibility, however great.

When looking at the social security system and the claimants who deal with it, we see a gross inequality of power. That is why the system is perceived by those who deal with it as inflicting a gross indignity on those who need to be subject to it. I have heard that expressed with some force by senior members of my own party, who in the past have been on benefit. I am also sure that others have done so. As there is such an inequality of power, the state needs to be careful about what are the purposes of government. Those purposes must limit the objective for which this power can legitimately be exercised.

That brings me to the subject of single parents. Although I have never read a word of Harry Potter, I am becoming a profound admirer of JK Rowling. In the last Parliament many people on the Conservative Benches argued that it was wrong to encourage single parents to go out to work. Now the Conservative Party says that it will withdraw an automatic right to benefits and impose actively seeking work regulations from the time when the youngest child reaches the age of 11. In fact, yesterday on the "Today" programme Mr Portillo even said that he was considering making them sign on every single day, although there are many places in rural England where the costs of doing so would use up in bus fares exactly the whole of the weekly benefit. I thought that the Conservative Party claimed to understand rural England.

That reflects a massive shift in the way in which the Conservative Party defines the purpose of the state. The old traditional family values way of the Conservative Party saw the purpose of the state as a sort of churchwarden of the church militants. This new version sees the purpose of the state as that of a security guard, guarding the floor of the London Stock Exchange. Between those two definitions of the purpose of the state lies a great deal of the tension of the Conservative Party in the late 20th century.

Where does new Labour stand? I have no clear idea what new Labour believes is the purpose of the state. In particular, I have no idea what new Labour believes are those areas of private responsibility, of private judgment or the areas beyond the state's competence where the state should not meddle. In fact, when I compare the Labour Party with the Conservative Party on this issue, it begins to look painfully like the old South African United Party. It does not intend to compel, but it does intend—the Chancellor of the Exchequer avows it—to set targets for how many single parents should return to work.

Our ideas on this are quite clear. We believe that the purpose of the state is to create for people the choice to decide such matters for themselves. For the state to create the opportunities is right; for the state to influence, to push, to cajole, to encourage, or to use people in one way rather than another is wrong. As my right honourable friend Mr Kennedy said in his book, family life and the bringing up of children are private matters. It is not just that that is not the state's responsibility but that the state cannot have the knowledge.

I shall never forget a speech made in this House by the noble Lord, Lord Evans of Parkside, in the debates on single parents at the beginning of this Parliament. He described how, when he was six, his father, at the end of breakfast, said goodbye and went off down the pit and never came back. He said that for a year afterwards neither he nor his younger sister would let their mother out of their sight. He said, "You could not have enforced the actively seeking work rule on my mother". It is the sort of thing for which the state cannot cater because it cannot know about it; it cannot understand it. It is, in the literal sense, ultra vires.

Is there anything in the world of benefits which new Labour recognises as ultra vires—something that is beyond the Government's competence to attempt? We can look at the stories about incapacity benefit. I hope that the Minister will be able to deny them. We know we are having a personal capability assessment. The Minister and I have discussed that before.

It means, according to the Independent, that people will be compelled, while on incapacity benefit, actively to seek work in areas which the test believes to be within their personal capability. The Minister knows that no test in that area is infallible. When people suffering from a severe disability believe that they cannot do something, it is hard to get them to do it until they get over that belief. I hope that that item is a misreport. If the Minister will say so, I shall be glad to hear it.

On the housing benefit issue, I am extremely pleased that the Bill will include a restoration of the right to permanent housing for the homeless. The Minister and I have fought that battle through together since 1995. I shall be glad if we can complete it together. On the other hand, it is being suggested by the Social Exclusion Unit among others that people in that position may be compelled, from the moment they become homeless, to accept the actively seeking work regulations. That entirely ignores what Shelter describes as the "re-entry" problem of coming back off the street. If any noble Lord has had a frightened bird in the house, captured it and tried to put it out of doors, he will know what I am talking about. It is not easy.

Does the state recognise a right of private judgment and a right of limit to its competence? This is where, once again, the problem of benefit sanctions arises; in the fraud Bill. Of course everybody wants to control fraud. But, because of the way the public spending round works, we get into a position that, if fraud does not exist, it becomes necessary to invent it. As soon as we start producing figures for undetected fraud, we are on a very slippery slope and justice is in real danger of going out of the window.

On that Bill I should like to know whether the benefit sanction is to be discretionary or mandatory. The Minister knows that I am against mandatory sanctions, even if I believe that in a particular case they happen to be the right ones. She also knows that we on these Benches will not support any such sanction until we know what means of subsistence will be available to those subject to them. That is not based on any great love for fraudsters. But if people who have twice committed fraud have a known skill and are then deprived of a means of subsistence, we know what they will do next. The Home Secretary talks at great length about controlling crime. I wonder whether the spreading use of benefit sanctions will do more to encourage crime than everything the Home Secretary can do to discourage it.

I listened to him on "Newsnight" last night. If I may say so, he was at his best. He talked about the way in which, in the 1980s, the bonds of society were broken. I understood what he was saying. But it is one of the bonds of society that if we see someone with no visible means of support we take the collective responsibility for maintaining them. So he is breaking another bond of society. When we talk, as we must, about responsibility, the responsibilities for which we should be first concerned are those which fall on us personally. If we are in charge of the Department of Social Security, keeping people alive when they are down and out is the biggest responsibility we can have. If we abandon that, we do not encourage anyone else to be responsible.

4.6 p.m.

The Lord Bishop of Portsmouth

My Lords, in the relatively short time I have been in this House I have learnt to value its conventions and, like many here, I look forward to the maiden speech of the noble Lord, Lord Mitchell, on a subject that I know will provide a great deal of wisdom and lateral thinking to the matter in hand today.

I want to take the opportunity from these Benches, in our debate on the gracious Speech, to concentrate on the welcome intention of the Government to introduce a Bill to improve the protection given to homeless people. The publication of the Government's housing Green Paper, Quality and Choice: A Decent Home for All, elicited widespread approval. Many of us look forward to seeing how the homes Bill will deliver government policy; for example, on the abolition of the two-year limit on temporary accommodation and the extension of a local authority's duties to prevent homelessness. I know that representations made by many agencies, including all the Churches, were taken into account on the detailed issues raised.

I should like, first, to draw attention to the underlying principle which should govern social policy in this area; it is one which the Churches—who have a long and honourable history of pioneering work in housing—warmly welcome. The principle is that we must give priority to those who are poorest and most vulnerable. The terms "poor" and "vulnerable" are open to diverse interpretation. But we can all note the intention signalled in the housing Green Paper that the definition of priority need should be broadened in such a way that our most vulnerable citizens are protected by the homelessness safety net. However, the balance indicated in the Green Paper between the desirability of choice, whether for social, employment or family reasons, and the constraints pertaining in the social housing sector is one we can look forward to seeing in more detail.

Secondly, the issue of homelessness, as your Lordships are well aware, is one which has both national and regional implications. Last year, according to Shelter—Britain's largest homelessness charity—a total of 166,760 households were recognised as homeless by local authorities in England. That probably represents over 400,000 people. Such a figure in itself masks the fact that over 100,000 further people are living in unsuitable or shared accommodation through no choice of their own. In the region directly in my purview—namely, the South East—the homelessness statistics published by the Department of the Environment, Transport and the Regions, indicate that close to 50,000 individuals are considered homeless, whether through a specific need or through their own intention. But what those figures fail to highlight is that in the same region 93,000 dwellings stand empty while a further 133,000 are considered unfit for human habitation.

The point I want to lay before your Lordships is that the desire for choice in social housing—admittedly a valuable and worthwhile goal and one with which I would not quarrel—none the less needs to be tested against experience; experience suggesting that there is a wide diversity within the regions. Some areas are unable to meet the pressures of demand for such housing, while in others there are properties which are seemingly difficult to fill.

Therefore, while we may extol the virtues of choice it would seem that that may be available only through easing movement across local authority boundaries in what amounts to a human version of cash flow. Such a movement would highlight the fact that homelessness is not just an urban phenomenon but a rural one, too, as I know from the streets of Portsmouth and rural Isle of Wight. In that context, we welcome the regeneration initiatives in the regions which may result in reducing the number of people moving to the south east from elsewhere.

A third issue I want to raise relates to the integration of social and economic and industrial affairs; that is, the treatment of asylum seekers in respect of housing. As the Government's plans have been adumbrated, there seems to be little specific consideration as to how the housing needs of those seeking asylum are to be met. The current government initiative of dispersal, like other recent developments such as the speeding up of appeals procedures, is laudable in itself but it has led to instances of considerable distress and quite the opposite of choice; for example, where families have been split up. There is also growing concern about the recently published guidelines on the detention of asylum seekers.

I suggest that that area needs careful forward attention and, if I may be so bold, some integrated planning. We need to think ahead about how we are to house all future citizens of our country. Any development we make in the homelessness area necessarily produces fresh opportunities. It would not be right for us to draw a conceptual wedge between the provisions we make for homeless people and asylum seekers who have their appeals ratified and have the possibility of living in this country for some time.

In returning to the homes Bill, which I regard as humanitarian, compassionate, just and thoroughly appropriate, I conclude by reiterating the broad welcome given to it both by the Churches' National Housing Coalition and by the Catholic Housing Aids Society in their joint submission to the DETR. I look forward to seeing the detail of the Bill when it is published.

4.13 p.m.

Lord Mitchell

My Lords, I want to begin by thanking the noble Earl, Lord Russell, for his generous words and the right reverend Prelate the Bishop of Portsmouth for his support.

Convention has it that a maiden speaker should offer warm words about your Lordships' House. And had I made this speech immediately after my introduction in May, I, too, would have offered those warm words. But this autumn has been a devastating time for my family and I speak to your Lordships today with a different perspective.

In September, my father, Leon Mitchell, died. He had been an inspiration to me and he will be sorely missed. But at least I had the consolation that he was present in your Lordships' House when I was introduced. Three weeks later, my father-in-law, Professor Jack Lowy, and my mother-in-law, Ruth Lowy, both died together. To my wife and myself, it felt as though we were suffering one body blow after another.

We have been deeply moved by the overwhelming response of noble Lords to our bereavements. From all sides of your Lordships' House we have received

heartfelt and sincere condolences. So, when I say that I have had a warm reception into your Lordships' House, I mean it from the very bottom of my heart.

I am an information technology entrepreneur. In my career I have started three businesses and have built up each one to become a market leader both at home and abroad. Of course I am driven by commercial motives, but my real joy is helping to create something from nothing and seeing people blossom as they thrill to new challenges and responsibilities.

I believe that this Government have been a good friend to small business. Corporation tax has been drastically reduced. Accelerated allowances have been given both to those who invest in research and development, as well as to those who install new plant and equipment. And who would have thought that it would have been a Labour Government who would reduce capital gains tax for entrepreneurs from 40 per cent to a minimum of 10 per cent?

My current company started its existence in 1992 with five people. Today, we employ nearly 200 people. It is the thousands of companies like mine up and down the country which generate new employment. Life is tough enough as it is and we need government to keep its involvement in business to a practical minimum. So I am delighted that in the gracious Speech legislation is being proposed to reduce regulatory burdens by removing inappropriate and over-complex regulations.

I am lucky to have worked in the information technology industry almost since its commercial inception. Today, it is the largest industry in the world and it is still growing at a double-digit rate. Even so, I must be frank and tell your Lordships that the dot.com frenzy at the beginning of this year shook me to my foundations. Somehow it seems that every principle I had learnt in my business life had been turned on its head. The dot.coms came onto the scene boasting how large their losses were going to be, using such terminology as "burn rate"—meaning how quickly they could spend shareholders' money—and measuring success by "earnings before expenses". I really thought that the world had gone mad.

Somehow—and here I probably show my age—it seemed that all you needed was to be young or pretty and the City would shower you with wealth. Well, the madness is over and sanity has prevailed. The good Internet businesses will succeed, while the rest have gone at a click of a mouse into the trashcan of oblivion.

As a measure of the scope of the Internet's influence, I would like to say a little about how it has changed two types of organisation at opposite ends of the spectrum; the big business and the small school.

In the United States, General Electric, the largest company in the world, is budgeting that in 2001 it will reduce its cost of purchase by 15 per cent. In its case, that will mean a saving somewhere in the region of £10 billion—billion, not million. It will do that by the hard-nosed use of e.procurement; that is the process of using the Internet to improve efficiency by driving down costs of buying goods and services.

Another computer company, Oracle, last year reduced its costs by 1 billion dollars using the same technology. Yet another American computer company, Dell, has steadily abolished inventory through the sheer efficiency of its purchasing system. It sources its purchases across the globe and has reached the ultimate efficiency where the only stock it carries is that which is in transit. Business-to-business Internet technology has made all of that possible. That, my Lords, is true productivity.

In absolute contrast, and to me the most exciting of all, are the developments which are taking place in education. I declare an interest in that I have recently been made a trustee of an organisation called the eLearning Foundation. Its task is to promote the usage of laptop computers in schools. Our objective is that there should be one laptop for every child in every school and we are delighted that the Chancellor of the Exchequer recently announced a £5 million grant to aid our development.

A couple of months ago, I visited the Bowbridge Junior School in Newark, Nottinghamshire, and what I saw made me tingle with excitement. This school is in a socially deprived area but is fortunate to have a charismatic headmaster, Mr David Dixon. He is totally convinced that IT in the classroom is a vital tool to help his children succeed. Here was a school where laptops were part of the teaching process. I saw enthusiastic teachers and keen children and sat next to a lively nine year-old who was totally at home with her Excel spreadsheet. Mr Dixon told me that, despite the fact that the children took their laptops home every night, not one had been lost or stolen. The most thrilling aspect of all was that the parents. who had seen their children use the machines at home, had begun to attend evening classes at the school so that they could also become part of the information revolution.

If that can be done at one junior school in one part of England, surely it can be replicated throughout the country. Imagine the result if we can ensure that when all our children complete their education they are totally at home with this essential technology. Young people will be totally equipped with the skills to make their immediate contribution to the knowledge-based 21st century, which is a price worth paying.

Finally, I pose a question: what is it that links the biggest company in the world with a small junior school in Newark? The answer is vision and leadership—the vision to see how the Internet and information technology can help to do the job better and the leadership to make it happen when all around are full of doubts.

4.22 p.m.

Lord Skidelsky

My Lords, on behalf of the whole House it is my great pleasure to congratulate the noble Lord, Lord Mitchell, on his moving, informative and exhilarating speech. I note that the noble Lord was asked to leave school at the age of 16 on the ground that he was academically unsuitable. There was no evidence of that this afternoon. The noble Lord has had a distinguished academic and business career, and we very much look forward to his future contributions to our debates.

I preface my remarks by apologising for having to leave early. As a number of interesting speakers are to follow, my early departure is a matter of enormous regret. However, I am unable to break a long-standing commitment to give a lecture to the LSE this evening. Therefore, it is an unsatisfactory compromise, for which I beg the House's forbearance.

There are fewer speakers in today's debate on economic and social affairs than on any other subject in the gracious Speech. Is it because we feel that there is nothing much to debate and that everything is more or less settled and all right? There are some grounds for making such a suggestion. The so-called macro-economic framework is now more or less settled to the satisfaction of all the parties. On the monetary side, one has a low inflation target and the operational independence of the Bank of England to set interest rates; on the fiscal side, one has the Chancellor's golden rule.

Certainly, there are questions to be asked. For example, how far has our recent excellent record of low inflation been due to superior monetary management or to other factors, such as increasing global competition or the cheapening of many goods and services? How far are our fiscal rules a real defence against what Keynes once called the "wicked Chancellor problem"? More generally, is the framework flexible enough to be able to cope with a serious shock, such as an American recession? Events will show. But this Chancellor has gone further than any of his post-war predecessors in de-politicising macro-economic policy, and for that he deserves great credit.

But what about policy? Is there nothing to discuss here? Our party has rightly criticised the Chancellor on two main counts: first, the stealth tax which was alluded to by my noble friend in his speech. The share of our earnings taken in tax—the tax burden—has risen from 37 per cent to 39 per cent in the three years of this Government. Here we begin to get some sense of the cost of Labour government. Secondly, we have attacked the Chancellor for his tendency to tinker continually with tax rates. There were 61 tax changes in the previous Budget. It is as though, having put macro-policy on autopilot, the Chancellor believes that he must earn his keep by constantly meddling with the details of the tax system. All of this is done in the name of innovation and enterprise, but with little attention paid to the cost of a constantly changing, increasingly complicated and unpredictable tax regime.

I argue that the purpose of the tax system is not to encourage or discourage this or that behaviour—I understand that the noble Earl, Lord Russell, said something similar—but to raise the Government's money in as simple, predictable and neutral a way as possible, which is certainly not the record of this Chancellor. Sometimes I wish that we could entirely dispense with the annual Budget and content ourselves with a report of the type that companies issue to shareholders every year, but that is just a pipe dream.

It remains true that the instincts of our party are to reduce taxes while those of the party opposite, and their Liberal Democrat allies, are to increase public spending even if it means higher taxes. I should like that central difference between us to be more clearly reflected in the policies that our party now offers to the electorate. On Tuesday, the shadow Chancellor Michael Portillo promised that, as a result of various savings, the Conservatives would be able to cut taxes by about £8 billion in their third year in office (2003–4). That sounds like a hefty sum, and I welcome it. However, we must bear in mind that it is less than 1 per cent of gross domestic product and about 2 per cent of the tax share.

Therefore, by its third year in office our party hopes to be able to reverse the 2 per cent increase in tax share achieved by this Government. However, that depends on the ability to find a saving of about £8 billion, only £5 billion of which has so far been identified. Of that £5 billion, £1 billion will be found by eliminating benefit fraud, which is the bottomless source of hypothetical savings to which all Chancellors are driven when they have run out of anything else to cut. To put the matter bluntly, the shadow Chancellor offers £4 billion, and even that is based on the acceptance of what now look like over-optimistic projections of economic growth. I fear that this is a mouse that is being dressed up to look like a mountain. Unfortunately, it is also a mouse which the Chancellor could swallow without batting an eyelid, and where would our policy be then? I am deeply disappointed that, having spent three years in opposition and argued the moral and economic case for lower taxation for 20 years, this is all that we are in a position to offer.

I remind your Lordships of just one of the economic arguments for lower taxes. Evidence is accumulating that, at least for developed countries, the larger the share of national output absorbed by the state the lower the rate of economic growth. I do not underestimate the problem of measurement or the tentative nature of such a conclusion. However, I should like to cite one interesting table which draws on the work of the economist Robert Barro. The table tries to estimate the effects on economic growth of the increase in public spending in 17 developed countries since 1960. Between 1960 and 1998 public spending in the United Kingdom as a share of national income increased by 8 per cent. According to those estimates, had it stayed at its 1960 level our national output would have been 54 per cent higher than it is today. That means that with health and education spending unchanged in percentage terms since 1960 we could, if we wanted to, now spend £102 billion instead of £52 billion of public money on health and £43 billion instead of £36 billion on education.

Two economists, one of whom, Tanzi, is head of fiscal economics at the IMF, conclude that, most of the important social and economic gains can be achieved with a drastically lower level of public spending than prevails today … not much higher than 30 per cent of GDP … However, this would require radical reforms". It is precisely because we are not offering radical reform in the three large areas of social security, health and education that we cannot offer more than token tax cuts. Up and up social security goes—at about the same rate as national income growth despite the large fall in unemployment over the past few years. No one talks any longer about "thinking the unthinkable". Given that trend in social security expenditure, if we want to increase the health and education budgets faster than GDP growth, taxes will have to increase. They are already programmed to increase.

That upward ratchet is there in the figures. What are we doing about it on this side of the House? The only way in which we can challenge that logic is to say loud and clear that an increasing share of improvements in these poor services of health and education will have to come out of private money by what are called "user charges". We have to say that pouring more and more public money into health and education will not bring about the improvements that the public expect from them. If we say that, we have to know why we are saying it. As a party we are reluctant to say these things because we are scared stiff of the electoral consequences of so doing.

For my own part, I believe one might as well be hung for a sheep as a lamb. If we are to go down, we might as well go down standing for something and explaining to the public why we do so.

4.32 p.m.

Lord Harris of High Cross

My Lords, it is an unalloyed joy to follow the noble Lord, Lord Skidelsky. I found much to agree with in what he said.

It has to be admitted that the Government have come a long way since 1997, recently, alas, mostly downhill. Of course New Labour created such hopes of a new era that disillusion was inevitable. Today, amid the carnage of the party battle, Labour's single consolation is that it stands, or droops, somewhat higher in the opinion polls than the Tories.

Instead of the gracious Speech heralding a single-minded, radical attack on the chronic, life-diminishing failure of decades of state monopolised education and healthcare, the Government have suddenly decided to resume their petty persecution of smokers. It is not only as chairman of FOREST that I have to regret and deplore their reneging on the voluntary regulation of tobacco advertising and their authoritarian itch to censor a free press. But research shows that bans on advertising will not reduce smoking because the advertisements to be suppressed give such prominence to those exaggerated and gruesome health warnings.

I turn to economics. From the Cross Benches I am glad to repeat my unstinted tribute to Her Majesty's Government for one outstanding success. As other noble Lords have said, by restoring to the Bank of England control over interest rates the Government have so far avoided the roller-coaster of inflation and unemployment which bedevilled previous Labour and Conservative administrations. As a result, the Chancellor has built on the sound inheritance from the Conservatives, which has been mentioned, not least the courageous Budget of the noble Lord, Lord Lamont, back in 1993, which created a stable economic environment for steady expansion. It is still early days, but so far Mr Brown gets higher marks than most post-war Chancellors.

Since we on the Cross Benches must apparently satisfy my old sparring partner, the noble Lord, Lord McNally, who is not present, on our independence, I thought I should make an effort and say that on the central battle against inflation Gordon Brown has proved the almost perfect complement to the noble Baroness, Lady Thatcher. Back in the 1960s and 1970s economists debated whether tight labour markets or monetary policy caused inflation. Economists at my own Institute of Economic Affairs analysed the causation as starting from wage pressure by monopoly trades unions, which led to rising unemployment, thereby provoking monetary expansion, which in turn produced inflation.

Without the curbing of trade union power in the 1980s there would have been no new Labour, no emancipation of the British economy, no market revolution and no complacent smile on the face of the Chancellor and, perhaps, the noble Baroness, Lady Hollis.

Recently, Simon Jenkins reminded us in The Times of the debt that Mr Blair owes to Margaret Thatcher. He pointed out: While pygmy social democrats pretended to 'break the mould', she smashed it to pieces". Without her transformation, he pictured Mr Blair as the Attorney-General in a Kinnock government struggling with another winter of discontent. Alas, this shared Tory/Labour success has been exploited by Her Majesty's Government to aggravate the mischief of high taxation. Like the Liberal Democrats, new Labour fails completely to understand the damage of high taxation and, until recently, over-regulation. All impose damage on economic efficiency and individual choice. I look forward to copying down from Hansard the striking figures given by the noble Lord, Lord Skidelsky.

On the burden of taxation as a share of national income, Tories and Labour have been content to dispute over decimal places while both acquiesce in the confiscation of around 40 per cent of GNP. The Government even concealed that burden by counting tax credits as a reduction in tax rather than an increase in expenditure.

The fuel protests and the growth of tobacco smuggling dramatise the consequences of taxation that reaches 80 or 90 per cent of prices. Lesser increases will naturally have a smaller impact. But at the margin all taxes caused—collectively and cumulatively large damage—in blunting incentives to work, to save, to invest and to economise.

Even at death the taxman cometh unbidden to snatch his 40 per cent at the expense of our children and grandchildren. I ask the question: how many pensioners now prefer to spend rather than continue a lifetime habit of saving for the benefit of the Chancellor?

The economy is certainly in better nick than in the days of old Labour and devaluation. Inflation appears to be under control. But labour markets are tight and wage pressure must shortly begin to trouble the Monetary Policy Committee. The budget is in surplus. But it is underspent and there are large reserves there ready for more election bribes.

Unemployment is down. But it is still around 1.5 million, despite new Labour's New Deal, which took a leaf out of the wicked Tory book by ending the dole for young people who refuse to take a job or enter into training. As noble Lords have said, exaggerated claims of success in employment ignore the cyclical rising trend of employment, the high drop-out rate from the New Deal, the substitution effect mentioned by the noble Earl, Lord Russell, and the enormous cost per job gained. There really are no miracles to boast of here!

In conclusion, I want to warn of a neglected danger to the health of our democracy, no less than that to our economy. It springs not only from new Labour's old tax and spend philosophy but also from the reckless outbidding by Conservatives and Liberal Democrats. All this highlights a far more serious, endemic form of corruption than the comparative trivia that concerns the Neill committee on standards. It stems from the vote-buying propensity of modern, unlimited democracy.

The more generous our view of Mr Blair's ability and innocent good intentions, the more deeply we should all dwell on his sad fall from grace. This should be more than merely a Labour Party anxiety. Opinion polls reveal a fading public trust in the entire tribe of politicians. Why should that be so? Leading politicians are not generally lacking in brains. They all work longer than the European Union-permitted 48 hour week. Yet they are never quite able to live up to their promises. Bluntly, politicians have proved a fearful flop in the post-war years.

Take the persistent failure in schools, hospitals, universities, tower blocks, roads, pensions, police, and so much else. They do not date from 1997; nor from 1979. The chronic, long-term lack of success in public services contrasts sharply with the transformation wrought by competitive enterprise in our homes, gardens, holidays, shops, pubs, restaurants, telephones, motor cars, word processors, and, not least, in our wardrobes.

Plainly, politicians have over-reached themselves. They are out of their collectivist depth. In doing too much, they do nothing well. Our mature democracy urgently needs to distinguish the agenda of government from the non-agenda. Politicians must learn to reduce their domain; to do better what governments have to do, including remedial care—not just money—for the minority who cannot care for themselves. That could in time leave the increasingly prosperous majority paying about half of present taxes and assuming more freedom and responsibility for their own lives.

4.42 p.m.

Lord Newby

My Lords, as, I hope, not too much of a pygmy former Social Democrat, I rise to address what the Government identify in the Queen's Speech as their central economic objective; namely, achieving a high and stable level of growth and employment. Within that, the Chancellor has increasingly identified productivity as the key issue he now wishes the Government to address. I was particularly interested to hear the excellent maiden speech of the noble Lord, Lord Mitchell, which dealt with the effect of the Internet on productivity. I say in passing that the Internet revolution will be seen as the equivalent of the printing revolution in terms of how it is changing the way in which we do business. Some of the large technology companies no longer allow their employees to communicate with each other by paper. Although we are not quite at the end of a paper-based world, much of business is now conducted mainly without paper. In terms of productivity, it is a single step-change cutting across both manufacturing and services, the like of which we shall not see in any other respect during our lifetime.

The figures on productivity are fairly well known. Most estimates suggest that, compared with the UK, the German economy has a 10 per cent higher level of productivity and that for the US the figure rises to as much as 45 per cent. Why is that the case and what can be done about it? Professor Jonathan Haskel, who may, for all I know, be a relative of the noble Lord, Lord Haskel, who will speak later in the debate, suggests that up to half the aggregate improvement in manufacturing performance will depend on new plants being opened and old ones being closed down. It is not simply a question of getting better value from what exists. As a general principle, that applies to much of the service sector in terms of the creation of new companies, as described by the noble Lord, Lord Mitchell.

There are many components to increasing investment and productivity. I should like to touch on three. The first relates to regulation. Undoubtedly, the ability of companies to invest and develop is constrained if management has to spend a significant amount of time dealing with petty regulation. We welcome the proposed Bill on regulatory reform and we look forward to seeing it later in the Session. In the pre-Budget Statement, the Chancellor took a major step in the right direction by reforming VAT for small businesses. We hope that that principle will be carried forward. The burden of regulation is an insidious one. While it is important that common standards are maintained across a whole raft of business activity, we have not done enough to make sure that those common standards are imposed with the lightest touch rather than with the most comprehensive and burdensome touch. We look forward to debating that Bill.

Secondly, it is important to look at the way in which government support the development of business in the regions. We on these Benches have been great supporters of the RDAs. There is a good deal of speculation about whether in future the RDAs will be the domain of the DTI or the DETR. Perhaps the Minister will comment on that when he replies. There would certainly be some benefit from having a stronger DTI involvement in the way government money is spent in the regions. However, it is crucially important that the regions have the flexibility to use government funding for industrial development and for training. In our view, that requires stronger regional structures and democratically accountable regional structures. A large amount of money is being spent in the regions in ways which, as the PIU showed in its excellent report earlier this year, are simply not efficient and effective. That will not change until the regions have greater power to decide these matters for themselves.

The logical, final important piece of the productivity jigsaw must surely be for this country to join the single currency. Academic work has demonstrated that cross-border trade intensifies competition; that greater competition leads to higher investment; and that higher investment leads to greater productivity. Within the euro-zone we can already see some signs of the benefits of that increased investment and competition. There is a strong argument that in order to have US-style growth and productivity one needs to operate in a full, US-style single market.

If it is possible to improve the performance of government in respect of productivity in terms of the way it bears on the private sector, it is also important that government should operate in such a way as to increase the level of public sector investment to match the needs of the economy. That can be done in various ways. Companies need a flow of skilled graduates. They need to have health workers. People need to be able to travel and to transport goods easily. Later in our debates we shall deal in detail with spending in those areas, but I should like to concentrate for a few moments on the overall position.

Last year, net capital spending by government was £3.2 billion. That was 60 per cent of investment in 1996–97 and less than a quarter of government investment in 1992–93. In 1998, general government investment was 1.3 per cent of GDP in the UK compared with an equivalent of 1.8 per cent in Germany and 2.8 per cent in America and France. It is hardly surprising, given such low levels of UK government investment in the public domain, that we have fallen behind our continental and American partners as regards how we are able to produce the working people we want and the services we seek. Even if the Government are able to distribute the vastly increased amount of capital spending for which they have planned over the coming three years, that will bring up government investment to only 1.7 per cent of GDP. That represents a major improvement, but it is still a long way from an ideal situation and remains a long way behind the investment made by our competitors.

Perhaps I may respond to the noble Lords, Lord Skidelsky and Lord Harris—they say that these Benches are in favour of high public expenditure paid for by high taxation—by saying that we on these Benches favour higher quality public services. Furthermore, we believe that the vast majority of the British population is in favour of higher quality public services.

Not many Members of your Lordships' House heard the comment made by the noble Baroness in respect of thinking the unthinkable, which was advocated by the noble Lord, Lord Skidelsky—although he did not go into great detail. The noble Baroness said, "We have; it was". In respect of many of the so-called radical alternatives which the noble Lord, Lord Skidelsky, might have had in mind, we share exactly that view. The truth is that, when asked about public services, the vast majority of people in this country support higher quality public services. However, they also want to know that, if higher taxes are required to pay for those public services, such tax changes should lead to specific changes and improvements in public services. That is why, as we prepare our programme for the general election, we shall advocate measured, targeted tax changes to fund highly desirable and popular improvements in public services.

Finally, on a rather narrower point, the Queen's Speech did not include the Bill anticipated to implement the Cruickshank report on banking. No doubt we shall see that legislation during the next Session. However, I have a question for the Minister in relation to the universal bank. From all the evidence that I have received, including discussions held recently with the LINK Consortium, it appears that the Post Office has now retreated from its plans to implement a universal bank account which would operate like a normal bank account, into which account holders could deposit cash or funds from other sources. What is now envisaged is a narrow account set up simply to receive unemployment benefit or social security payments, out of which payments can be made either in cash or to settle utility bills. I should welcome an assurance from the Minister that the Post Office, if it is to implement a universal bank, will achieve a truly universal banking system rather than simply set up a deposit box into which benefits are paid and out of which people then pay their bills.

4.53 p.m.

Lord Desai

My Lords, before I turn to the detail of our debate on economic affairs, perhaps I may express a point that is very near to my heart. Although he is not now in his place on the Woolsack, it gave me great pleasure to see the noble Lord, Lord Mackay of Ardbrecknish, in his new capacity as our Chairman of Committees. He and I came into this House together. Over each stage, he has steadily progressed towards the heart of government, while I have moved away from it. I am glad about both of those movements. The noble Lord, Lord Mackay, was once a Liberal, then a Conservative and now takes a neutral position. I hope that, after a long stint as Chairman, he will then transit to where he belongs: on the Front Bench of my party.

We have had a good debate. I shall mention especially the brilliant maiden speech of my noble friend Lord Mitchell, to which I shall refer shortly. We also heard a bold and interesting speech from the noble Lord, Lord Skidelsky. I should like to fashion my speech in relation to what he had to say, because his comments were extremely interesting.

I think that we are all agreed that the economy is in a good state. I would say also, as was pointed out by the noble Earl, Lord Russell, that we can share in part in the Government's good performance, but that we should not be greedy and claim too much for ourselves. Following our exit from the ERM, successive Chancellors have put in place an extremely effective macro-economic framework. Such a framework has not been put in place in this country ever before. It has now lasted for around eight years and it has delivered for us a recession-free economy. We should welcome that. It has required extremely firm discipline. At the beginning of the Government's tenure, my right honourable friend the Chancellor was criticised for his rigour, but he has stuck to his guns and proved that—although hardships were encountered at the beginning—firm discipline as regards fiscal policy has paid a good dividend. The perennial problem is that of the wicked Chancellor, but I believe that we now have a new problem: wickedness now belongs to ex-Chancellors rather than to present Chancellors. That represents a transformation in political life.

I would say that our party is not a party of lower taxation and I am proud of that. It is easy to implement low taxation because it is easy to neglect the railway system, hospitals, agriculture and so forth. Floods and accidents may take place, BSE may take hold—and where is the cost of such events? It is not reflected in a lowered GDP. That is an interesting point. The noble Lord, Lord Skidelsky, spoke of regression in the growth of GDP. However, as a professional econometrician, I am very sceptical about regressions. It is easy to measure good news and to ignore the costs we incur if we neglect to invest in the infrastructure of the nation. It is easy to live with poor children, illiterate adults and long queues in hospitals. By doing that, it is then easy to cut taxes, but there are costs.

I do not speak only of percentages because, as the noble Lord pointed out, £8 billion is not a great deal of money. For an individual it may represent a vast sum, but it is not a great deal in terms of the national finances. It must be acknowledged that we have a seriously rich economy. Make no mistake about that. With such a seriously rich economy, it is our responsibility to see to it that decent standards of health and education are provided for all of our citizens, regardless of their circumstances. That is what we should be aiming to achieve. The numbers involved in spending and taxation provide the means to that; they cannot provide the end of public policy. Public policy should concern itself with public well-being rather than numbers.

I am therefore glad that, over the past four years, the Chancellor has succeeded in an extremely innovative redistribution by shifting money away from families without children to families with children. That is an intelligent redistribution of wealth. He has seen to it that in the future pensions will be put on a more secure footing. He has provided incentives for people to take on jobs. However, where I probably move even further away from the centre of government is when I say that I think that we value paid work too highly, while we devalue unpaid work too much. This is especially a problem as regards women in their role as carers. Unpaid work represents one of the most important elements of our society. If it were not for the unpaid work undertaken by women as carers, we would have a far more miserable society than is the case. Indeed, that is my one criticism: in asking people to take on paid work (I shall not refer to such work as "work" but refer to it as "paid work") as a route out of poverty, we are in serious danger of neglecting the value of our unpaid workers. Such unpaid workers provide an effective collective and cohesive force which we should not neglect.

Having said that, I have never been shy of embracing higher taxation. I was somewhat puzzled by the noble Lord, Lord Higgins—whom I have always respected as having a sound fiscal intelligence—when he complained about the upgrading of the limit on national insurance contributions. He said that it had gone up by 7 per cent more than the rate of inflation. He should have said that the ceiling was the most inequitable thing in existence. Why should national insurance contributions have a ceiling at whatever it is set at? All that does is subsidise higher-paid people—and the last thing higher-paid people need is subsidies. It is about time the middle class stopped benefiting from the welfare state and started paying for it properly.

We, as a party, are stressing the importance of our citizens' well being in a collective and humane way. We will find out what it costs and then we will ask how we can finance that by distributing the burden of taxation as equitably as we can. That is our stance. If the party opposite believe in tax cuts, let them. The immediate past year has proved that the cost of under-investment over a long period of time can be horrendous. We should avoid any such under-investment in the future.

Let me turn to the speech of my noble friend Lord Mitchell. What he said about the Internet is right. It ties in with the secret of why economic performance has been very good, not only in this country but in many other countries. We have had low inflation and good growth. Part of it is due to the fact that, with globalisation, the price of manufacturing is falling because of greater competition. Here again we must make every effort to retain the thrust towards freer trade in our international policy. We must not let the access that developing countries have to our markets ever diminish. They must have greater access because we gain from their competitive strength.

IT has immensely benefited many businesses. I very much agree with my noble friend Lord Mitchell that "B2B" has benefited businesses by cutting the cost of inventories. For the first time in many years, there is a capital good which gets cheaper over time and better in quality. That has not happened before. It increases profitability because you are buying capital cheaper and saving on costs.

I am rather sceptical about studies on productivity. As we give up macro-economic interventionism we suddenly have great faith in micro-economic interventionism. I do not believe that any government knows anything about productivity, which is very hard to measure. Although I pay tribute to Professor Jonathan Haskel—a friend of mine who is related to another friend—the idea that governments can tinker with productivity is not a good one.

Let me give an example. Conventional numbers of investment and so on could never have predicted the fantastic impact IT would have on productivity. Not by any token does IT mean more investment; it means less. It is not the input that counts but its effectiveness—and IT is more buck with lesser bang. That is the kind of thing we should be looking for, but governments do not know very much about it. Governments know very little about how to run businesses—thank God. While I am all for more PhDs and economists being engaged by the Treasury to study these things, I hope that we do not take the exercise too seriously because not much will come out of it.

The important thing is not whether we catch up with America in levels of productivity—these things are dubiously measured anyway—but that the economy sustains enough profitable businesses which, because they have to be competitive, have to be productive. We must ensure that productivity grows at an adequate rate. Whether or not we reach American standards is neither here nor there.

5.5 p.m.

Baroness Gardner of Parkes

My Lords, I enjoyed very much the speech of the noble Baroness in opening the debate. It has been a long time since I have heard her speak on this subject, although, when I was on the other side of the House, I used to listen to her regularly when we debated this topic. This is the first time I have heard her speak as a Minister and I found it most interesting.

I am delighted to hear that she has corrected the problem of inherited SERPS. I feel very strongly on this issue. As a national health pensioner, I have always felt that the difference in provision between men and women was an absolute scandal. We have both paid exactly the same 6 per cent contribution. If my husband dies I shall receive a 50 per cent pension, but if i die he will not receive a penny. That has been corrected now but nothing was ever done retrospectively for anyone. That was wrong. I am pleased to hear that the SERPS problem at least has been dealt with.

I intend to speak on the issue of identity cards. In doing so, I shall refer to my earlier dental experience. As a national health dentist in the 1950s, I used to say at dental conferences how easy it would be if we had a simple card. It could be slotted in to show who the person was and their number. As an Australian, I dared to suggest this. The British dentists were horrified. They said, "We were told after the war that this country would never have to have identity cards again".

As time went by, I discovered that there was a kind of love/hate relationship with identity cards. When a patient came in for treatment we would ask him, "What is your national health number?" He would say "I have no idea", but would produce a national insurance card. We would say, "No, that is not what we require. We have to have a national health number". My secretary, who had been there long before I joined the practice, would say, "It is your old identity card number. Do you know that?"—and everyone would say, "Oh yes", and immediately give their identity card number. They knew it; it was burnt into their brains.

But then, of course, newer people, like myself, arrived from countries overseas and were given an NHS number. We did not have an old identity card number relating to where we were born, where we lived and so on. I am not sure how the system worked.

In the 1960s there was a big scandal involving Russian ballerinas, who arrived over here and had crowns and other expensive dental work carried out on the national health for practically nothing. I think they used to pay 30 shillings in those days. There were also tourist organisations which arranged health tours. People would come from the continent, spend a week in England and get a full set of new false teeth for £4.50, which was cheaper than on the continent. None of those people was entitled to any kind of benefit under our health or social security provisions, but it became a big thing.

In Australia, you cannot receive any benefit of any kind unless you have a tax number. It does not matter if you are never going to be liable for tax, you have to have a tax number. This is a marvellous way of avoiding the kind of fraud referred to by the noble Baroness. I think she said that £140 million will be saved by the payment of social security directly to bank accounts. That is a large amount of money. However, a large amount of money is lost through deliberate fraud—and we would prevent a lot of that if we had a system of definite identification of people and their entitlements.

How do we differentiate between people who are entitled and people who are not entitled if we have no documentation? Everyone nowadays in this country has some kind of plastic card—for example, a credit card or a debit card. My purse is overloaded with cards from Sainsbury's, Tesco's, Boots and W.H. Smith, to name but a few, all of which give me points or encourage me to carry plastic with which to identify myself, I suppose as a target for future sales. Driving licences now carry a photograph. I sent one in but the licensing office did not like the photograph. It sent it back and said that the photograph must have a plain, clear background. I had a leaf showing in the background.

Nevertheless, we all find ourselves more and more associated with some kind of identification. I believe it has reached the point where anyone who now objects to having identification must have some kind of ulterior motive for doing so. It would be a good, clear system. Even in New York, where I have just been for a weekend, in order for a senior citizen to obtain a reduced bus fare it is necessary for him or her to have a Medicare card. The Australians use a tax number; the Americans use a Medicare card. I do not care what it is called, but some form of identification is necessary.

Last week, I attended a meeting of Link—the people who operate the automated teller machines. The subject of the meeting was social exclusion: finding ways to help the poorest in society and to enable them to obtain access to their money—and I believe that they will succeed. Those at the meeting said that ATMs have a negligible loss. I asked questions about that because I am a bit of a questioner. It was said that there is no evidence of any need in this country for the South American system whereby people enter an enclosed glass box before keying in their number. They said that the ATMs are no problem here—although I saw in the television programme "Bread" that as the man got his money out of the ATM someone seized it from him in the street. They said that the huge problem in this country is credit card fraud. People who take a credit card in payment hardly look at the signature.

I have had personal experience of this problem. I found a debit of £3,500 for a carpet listed on my credit card account. I remembered no such carpet. When I telephoned the company, I was told that it had been purchased in Birmingham, and at that time I had not been to Birmingham for two years. It turned out that someone had broken the code on the NatWest computer and had made a false card in my name. Fortunately, the person had mis-spelt "Gardner", so it was not hard for me to prove that it was not my card. Apart from that, the card entry looked perfect. However, not understanding the way in which Peers sign their name, the person had signed "B. Gardner"; the signature bore no resemblance to my own, so there was no doubt that it was fraud. Such fraud is easy if there is no means of checking on a person. Voluntary cards can be purchased for £5 and are very good for young people when proof of age is required when buying alcohol, cigarettes or lottery tickets. The young are geared to accepting the idea of a form of identification.

The terminology is not important. The Government may not want to call such cards "identity cards" because of the hangover from war-time, although that was quite a long time ago. They seem to like the word "people", so they could call it a "people's card", or a "person card". I am not worried about what the proof of identity would be called. In opening the debate, the noble Baroness said that the Government want a moral economy, not a black economy. Identity cards would be a way of achieving that result.

5.13 p.m.

Lord Haskel

My Lords, today's debate is about economic and social affairs. How perceptive of the usual channels to put these two topics together. As my noble friend Lady Hollis said, that is precisely what the Government have been doing. She called it a "moral economy". Unlike the noble Lord, Lord Higgins, I did not find that aggressive; it is an accurate description of what the Government are doing.

Yesterday, in the debate on the humble Address, the noble Lord, Lord Rodgers—I am sorry that he is not in his place—accused the Chancellor of meddling in the affairs of other departments. The noble Lord also said that the Treasury was almost detached from government. I am not sure how both of those can be true, but it seems that the noble Lord has missed the point. He has failed to understand that what the Chancellor is doing is not meddling, but doing what the noble Baroness, Lady Ashton, described in her excellent speech yesterday as, joined-up implementation to match joined-up thinking". That is what has been going on.

Because we do not debate money Bills in this House, we rarely speak about the Treasury. That is a pity, because there have been many important changes. Since May 1997, we no longer have a Treasury which believes that the price of a healthy economy is social division. As my noble friend Lady Hollis told us in opening the debate, instead, we have a Treasury that is committed to delivering a healthy economy with higher levels of sustainable growth together with a fair society—a Treasury that has made that most difficult leap from financial controller to working with other departments to achieve social as well as economic goals.

Yes, things have changed. Noble Lords need not take my word for it. Let us look at the facts. Most of the Treasury initiatives have both social and economic objectives. A number of noble Lords have spoken about the New Deal. Previous governments managed the economy with top-down plans, with tax incentives and grants. Today, incentives have to be much more broad-based. I think we all agree that the modernisation of our economy cannot be achieved by merely rewarding the few; it must be achieved by spreading the opportunity for employment, increased earning power and education much more widely. That is the real purpose of the New Deal, with its personal advisers helping people to acquire the skills that they need to get better jobs in the long term. With or without substitution, the economy benefits not only because people are no longer paid to stay at home, but because a growing economy needs people with better skills. That is economic improvement and social justice working together.

Or let us take science. My noble friend the Minister who will reply is Minister for Science. It is right that we should invest more in our science base. Science creates new industries and modernises our economy while at the same time improving health, education and recreation. Again, that is the economy and social justice working together.

As regards tackling poverty, simply compensating people with benefits is neither an economic nor a social solution. With no minimum wage and an unreformed tax and benefits system, many poor people faced an unemployment trap anyway. People need incentives at the bottom of the labour market as well as at the top. That is why it is just as important for the Treasury not to have penal rates of tax at the top of the labour market as it is to make work pay and tackle the poverty traps at the bottom of the market. That is social justice and the economy working together. In addition, let us not forget about the efforts of the Treasury to encourage banks and building societies to provide basic financial services for the socially excluded.

As the noble Lord, Lord Newby, told us, the Treasury is even working to raise productivity. The noble Lord reminded us that, however productivity is calculated—output per worker, output per hour worked, or total factor productivity—there is a substantial gap between this country and our overseas competitors. What the noble Lord did not tell us was that there is an even greater gap between our better performing companies and our poorer performing companies. That is equally true in manufacturing and in services. If we do not close those gaps, millions of jobs are at risk and we shall lose out in the race for global investment. Incidentally, when speaking of the work of Professor Jonathan Haskel, the noble Lord, Lord Newby, asked whether he was related to me. He is my son.

My noble friend Lord Desai also spoke about productivity. I agree that this is principally a task for managers and workforces. However, as the noble Lord, Lord Newby, said, the Treasury has a role too: in encouraging enterprise, ensuring that there is investment in the infrastructure, and maintaining a competitive environment. But in that role there is also a social dimension, in securing people's jobs and tackling the old dependency culture. That is economic improvement and social justice working together.

The Treasury is tackling child poverty as an important goal for the economy as well as for society. If we invest in our children, we invest in the future of our country. Poor children are less likely to stay on in education and training and to participate in the skilled workforce that the economy needs. Yet, as my noble friend Lady Hollis reminded us, one child in three is still horn in poverty. I do not need to spell out the social benefits of this policy because she did it very well; and so reducing child poverty is yet another example of the needs of the economy and social justice working hand in hand.

What is politically important is not only the absence of coercion and restriction, but it is also giving people the capacity actually to do something. So we should not be surprised that the recent publications coming from the Treasury, as well as dealing with tax and the public finances, also deal with tackling poverty, extending opportunity, raising productivity, and ensuring fairness for children and pensioners.

All this did not happen by accident. It was not inherited from noble Lords opposite. The Chancellor planned it that way: he planned it when preparing for government and during government. But perhaps there has been a change that was not planned and perhaps not expected. This is the changed relationship that the new Labour Government have with business and industry. Perhaps this is the point when I should declare that this is an area in which I have worked since as long ago as 1972 and continue to do so through my chairmanship of The Smith Institute.

What has surprised me is that, in the same way as the Treasury has connected a strong economy with a fair society, business has adopted its own version of this approach. As the new chief executive of Coca-Cola put it recently, the business of business is to serve society. In the same way as the Government's economic objectives are good for their social objectives, so business has found that being a good corporate citizen is good for business. Noble Lords opposite may interpret this as red tape or a burden on industry, but business wants to be a good citizen. What is in dispute is how this is regulated, as my noble friend Lord Mitchell explained in his excellent maiden speech. Business wants to be a good neighbour. Firms big and small demonstrate this, large firms by doing something helpful on a national scale and small firms by perhaps helping out with local sports clubs or local church groups. There are many flourishing organisations dedicated to the success of this, such as the Conference Board. Indeed, corporate social responsibility is moving strongly up the agenda of companies, and is a matter of study at business schools, universities and consultancies. Companies want to be more family friendly, if only to keep their good employees. The Government agree, and today's Green Paper on parental rights lays out the choices. The question is: where to draw the fairness line?

The result of this change is that we now have business and government with shared objectives, economic and social. Any decent manager will tell you that the key to success is working towards shared objectives. Shared objectives between government and business make for a much healthier relationship, far healthier than the previous relationship based on permissiveness and exploitation and the old assumption that Tories were pro-business and Labour was anti-business. Today, with our shared objectives, the discussion between government and business is about where to draw the fairness line. It is this which facilitates much of the discussion between government and the private sector. It facilitates public/private partnerships and proper discussion about regulation, about quality, about standards and the environment; all the things where business and government come together.

Surely this is a much more beneficial relationship, more beneficial than the "them and us" relationship that business seemed to have had with the Tories. Indeed, This is such obvious commonsense that I think the Tories find it difficult to criticise or say anything coherent about it. This is why noble Lords opposite will find it very difficult to win back the support of the business community, which they once took for granted.

Yesterday my noble friend Lady Jay, the Leader of the House, described the Government's economic policy with the words "clear strategy and direction". She is right. In today's volatile world the best strategy is to make a few clear choices that define the direction in which we want to go, and to stick to them. My noble friend Lord Desai welcomed this. This is why I strongly welcome the opening sentences of the gracious Speech, where we have these words: My Government will continue to pursue its central economic objective of high and stable levels of growth and employment. I welcome this because it means that we are continuing in the direction of a healthy economy and a fair society.

5.25 p.m.

Lord Roll of Ipsden

My Lords, I want to begin by associating myself with the congratulations expressed to the noble Lord, Lord Mitchell, on an excellent maiden speech. It was, as has already been said, informative and indeed moving. I, for one, hope that we shall hear him often because, apart from anything else, I require a good deal more education in the internet economy.

After yesterday's flood of wit and the traditional assurances of mutual esteem and friendship across the House, we now return to the nitty-gritty of our normal parliamentary activities. That is not due to the volume of new business in the gracious Speech or to the extent of its controversial nature. Apart from two or three exceptions, looked at objectively, there is very little controversial in the gracious Speech. However, it is now believed on all sides, rightly or wrongly—I think probably rightly—that we are only about five months away from a general election, so inevitably party politics will be revived, no doubt using this House as one of its stages.

Indeed, today, despite the relatively harmonious debate, there have already been some indications of the split on many issues of one kind or another. I want to concentrate on the question of broad economic policy: what has already been called macro-economic management. The gracious Speech gives us the opportunity both to look ahead and to see what business is coming, as well as to provide a sort of end-of-term report on the activities of the Government hitherto.

So far as the first part is concerned, the noble Lord, Lord Haskel, has just quoted the first sentence of the gracious Speech, which contains the phrase, continue to pursue its central economic objective of high and stable levels of growth and employment. We are all agreed on that, and if that is the point we do not need particularly to look ahead, although we will have a Budget, I assume, before the election. We had the Chancellor's Pre-Budget Report in November. As far as the end-of-term report on what the Government have done hitherto is concerned, on my chosen theme of macro-economic management I can give the Government very high marks indeed.Of course there are many individual issues on which there can be debate, and much that has been said on the side of the Government is questionable. But on the whole I think we have achieved stability of the economy, while unemployment has fallen, employment has risen, prices have been stabilised—I shall come back to that in a moment—and growth has been at a respectable, if not particularly high, level.

Perhaps the main thing we suffer from—though this is not to be laid at the door of the Government—is the lack of growth of productivity, to which the noble Lords, Lord Newby, Lord Desai and Lord Haskel, referred. Indeed the major difference between our economic progress and that of the United States, fragile though that may be in some respects, is precisely in the area of productivity growth. However, this is not a matter which can be cured overnight—I recognise that—nor purely and simply by action in Parliament.

In talking about the stable economy, the gracious Speech also says that this is in order to provide the resources for improving the condition of our people. How do we stand on that point? I realise that there is much in the catalogue of measures and achievements mentioned by the noble Baroness, Lady Hollis, today that we must recognise and praise. However, as has been mentioned by a number of speakers, we should also recognise that poverty is still with us, particularly as regards the glaring gap between the rich and the poor.

Despite what has been done, especially in regard to youth employment, welfare to work, education, and so on, that gap between the rich and the poor has shown a stubborn persistence; indeed, by some statistical measurements, it has grown. Much as government activity in those direct areas is to be welcomed, both through legislation and through other means, it is not the final answer. Poverty and the gap between the rich and the poor is deep-seated: it has historical and cultural roots that are not easy to remove in one Parliament, or even in two or three. Continuous and constant vigilance in this area is needed. It must be tackled by continuous attempts through education by all the means at our disposal. It is a very difficult problem.

Those noble Lords who have visited the United States in the recent years of boom will know that even there, despite the extraordinary length and strength of American prosperity, you still see the unemployed youth lying on the streets of Washington both during the day and at night. It is not an easy problem to solve, but I insist on mentioning it because it is something of which we should always remind ourselves.

I mentioned productivity. I agree with noble Lords who have spoken on the subject that this remains a very serious problem. Why is it that I give the Government such high marks for macro-economic management? What have been the main instruments, or factors, that have led me to that conclusion? First, there is the change that has taken place in the methods for dealing with monetary policy. The granting of operational independence to the Bank of England—almost the first action that the Government took on taking office—is something that I certainly welcome. After all, I had the honour of chairing a panel of independent, distinguished experts five years ago that made recommendations which were almost exactly the same as the measures that the Government put into practice in 1997.

Secondly, there is the fiscal arm. Although, obviously, there must be many differences of opinion in this respect, as I said quite early on in the life of this Government when I spoke about the projected measures, I thoroughly welcome the decision of the Chancellor of the Exchequer—or welcomed it at the time—to have a kind of truce for two years and to continue with the taxing and spending programme that he had inherited, and to wait until, in the celebrated phrase, he had "seen the books" before moving ahead.

That was entirely right for another reason. After 18 years in the wilderness and without knowing the precise situation, it would have been folly to my mind to open the door to all the claims that had accumulated at the time without any regard to priority, to timing, and so on. Indeed, the Chancellor has been able to build up a substantial surplus. He has already been able to give us a programme of spending for some years ahead. In the November review we heard a little more about his plans. No doubt we shall get to know their detail in the forthcoming Budget. Therefore, the Chancellor is right on both counts.

I was particularly pleased that the noble Lord, Lord Skideisky, acknowledged, at any rate, that part of the work of the Chancellor of the Exchequer. Admittedly, the noble Lord went on to be critical of the Government's policy in regard to taxation. The noble Lord spoke on that as a party political point with moderation and with a kind of intellectual balance that I would expect from a distinguished economist. However, I am much more on the side of the noble Lords, Lord Desai and Lord Newby, in that respect. I cannot see either the intellectual, or, in the broadest sense, the political case for elevating reduction in taxation to an end in itself, which is totally unrelated to what it means as regards spending and the total balance of the economy. The matter has to be dealt with as part and parcel of the overall picture and in relation to spending.

I mentioned the United States. The work of the Chancellor of the Exchequer thus far has given us some assurance that we are relatively safe against certain economic shocks that we might possibly suffer in the near future. However, there is one particular aspect of our present situation that is somewhat disturbing. The clouds on the horizon seem to be getting both bigger and darker. I have in mind the American economy, which has had a quite unprecedented boom both in strength and length. Much of it is perhaps of a somewhat meretricious character. The savings ratio in the United Staled has dropped to zero and below zero; it is negative. Interest in fixed income, even in dividends, and price earnings ratios have taken a back seat compared with the search for continued capital appreciation. Therefore, the stock markets, which in the past few days have shown their volatility in a very big way, have become the guiding principle of the American economy, or so it appears.

If that goes on and if the United States is really slowing down now—it is hoped, after Alan Greenspan's recent speech, that it will be a soft landing, but you can never be sure about that—I believe that the wisdom of what we have done so far will become even more evident. We may not: bhe able to withstand all the consequences of an American decline in growth, let alone a hard landing. But, at any rate, we have more or less guarded against that by what I should like to call the ultimate Keynesian wisdom of our recent policy.

Perhaps noble Lords will bear with me for just a few moments longer. I should like to return to my "King Charles' head"; namely, Europe. I d o so particularly in view of the fact that the noble Lord, Lord Newby, mentioned his favouring of our entry into the single currency. As some noble Lords may know, I am parti pris in this. I have had very positive views about European integration since 1943 when I was much involved in Washington in inter-allied planning and could see what was happening to the to-be liberated areas, and so on. For me, entering the single currency is pretty evident. Nevertheless, it is a subject on which I am afraid I cannot give the Government the high marks that I gave them for economic management.

I should like to recall the situation as it was in May 1997 when the Government came into power. I have in mind public opinion generally—the general feeling about it—which was more or less balanced, although there was possibly a slight majority in favour of our joining the euro. If we compare that with today's situation, which is not the fault of the Government except by omission rather than commission, we can see that the Government have allowed the opposition (not just the Official Opposition but the opposition to the whole idea) to gain ground without making any attempt to counter it. So we now find ourselves in a situation where the press is almost entirely opposed to any further European integration. I suppose that it would be very improper to see any correlation between editorial policy and the views of the proprietors of the newspapers. Nevertheless one cannot altogether escape the coincidence between the two, particularly on the part of two of our newspaper tycoons who, I believe, have probably for themselves long since given up the pound in favour of the American dollar.

But be that as it may, I think that we now have the situation in which, whatever the Government decide to do—I can understand that there may be political, tactical and even electoral reasons for not taking sides too definitely at this stage—it will be extremely difficult to retrieve the situation and that I very much regret.

5.40 p.m

Lord Razzall

My Lords, I think that everyone would agree that the gracious Speech this year was not really a gracious Speech. It was probably at best half a gracious Speech and one which clears the decks for the general election which is clearly signalled for next year, presumably on 3rd May. It could not be described by any stretch of the imagination as a legislative programme for government for the next 12 months. I do not often agree with anything that William Hague says in another place, but I rather agreed with his comment yesterday that there was so little in the gracious Speech that it was good of Her Majesty to deliver it at all!

Having said that, were I to advise Ladbrokes, I would not suggest that it alters its odds in favour of Conservative victory in the next election in the light of the remarks of the noble Lord, Lord Higgins, on behalf of the Conservative Party. I note that the noble Lord, Lord Rees-Mogg, is present. He has tantalised us in one of the foreign owned newspapers with his view that it is not all over until the fat lady sings. I do not think that he would dare to use those terms, but I think that noble Lords have my gist. Nevertheless, as I say, I do not think that Ladbrokes should alter its odds, particularly if the Conservative Party takes the advice of the noble Lord, Lord Skidelsky. I should have thought that the programme he outlined for his Conservative Party colleagues—I was interested to note that this was trailed by Mr Kaletsky this morning in the newspaper of the noble Lord, Lord Rees-Mogg—would be a recipe for an even greater defeat for them at the next election than that which in the view ofmost serious commentators they are likely to achieve.

If there is one fundamental reason for that, it is that which my noble friend Lord Newby gave in his speech, which I commend to the House; namely, that it is clear that any Dutch auction between the Labour and Conservative Parties on taxation and the reduction of taxation will put off the British electorate, because all the evidence shows that the electorate of this country want decent public services and are prepared to pay for them, even if that requires some increase in taxation, provided they are satisfied that that taxation is used to improve the services that they want.

My noble friend Lord Russell dealt with what is loosely described in the rubric to this debate as social affairs and my noble friend Lord Newby concentrated on economic issues and the economic framework of our debate. Given that the noble Lord, Lord Sainsbury, is to reply to the debate on behalf of the Government, I wish to concentrate on the trade and industry aspects of the debate, which not many noble Lords have mentioned today.

Clearly this is not a legislative programme for government. Therefore we accept that the Government did not include a number of Bills that they might have included had they had a full 12-month Session ahead of them. It is obvious that the lack of a consumer protection Bill constitutes a massive gap in the trade and industry portfolio. Everyone has called for such a Bill. The Government have indicated that they would introduce such a Bill but they have chosen not to do so. I believe that that was indicated by the noble Lord, Lord McIntosh, in answer to a Question I tabled a couple of weeks ago. However, it is clear that a Bill is necessary to strengthen the role of trading standards officers to protect consumers from some of the market abuses in what has become known as "rip off Britain" and to deal with unregulated money lenders, rogue traders and the "cowboy" tradesmen in the building, plumbing and repair fields. That Bill is necessary, all the consumer organisations are calling for it and it is a serious disappointment that it is not included in the gracious Speech.

My next point may seem a detail. However, the second disappointment is that no Bill has been brought forward to give effect to the recommendations of the Cruickshank report on bank regulation. That was a strong report which argued that the monopoly power conferred by the bank clearing system on the major banks was worth probably about £5 billion a year in excess profits and advocated a regulator of that network. It is particularly disappointing that because of election pressure the Government have not included that Bill.

The third area in which we on the Liberal Democrat Benches would have wished to see legislation introduced—this is more controversial as far as the Government are concerned—is with regard to the climate change levy proposals. We should like introduced instead a much simpler carbon tax provision, under which there would be a simple calculation on "upstream" fuel at the point of production or importation based on its carbon content. That would have swept away many of the difficulties of the climate change levy.

However, we face an election in the spring. The only trade and industry Bill we shall have is the Bill to attempt to remove much regulation. I am not sure whether the Sun newspaper got it right this morning, but I understand that it is likely to be one of the five Bills that the Government are determined will be passed. I understand that it will commence its proceedings in this House. However, I hope that the Minister will confirm that. I leave it to others to debate the detail of that Bill and in particular the procedural consequences for Parliament, which no doubt will be much debated. However, as this is the only trade and industry Bill that the Government have brought forward, it is worth devoting some time to some of the problems and to ask the Minister a number of questions.

First, it is clear that the bonfire of regulations that everyone, and in particular business, is calling for is necessary. This is not a partisan point, because no doubt both the parties which have been in government for the past 23 years are responsible for the regulations that are in place. I suppose one could say that the Conservative opposition are marginally more to blame in that they had a longer time in which to do something about it than the current Government.

Notwithstanding the valiant work of the noble Lord, Lord Haskins, in the new unit established by the Government, there still remain significant problems in this area. I summarise those problems as follows. First, there is what has become known as "gold plating". There is no doubt whatever that a large number of regulations, in particular those brought in in response to European directives, have been gold plated; in other words, additional regulation has been imposed to that which was required by the relevant European directive.

The obvious example of gold plating is the working time directive, the regulations of which were brought in by the present Government. We strongly supported the implementation of the working time directive but we believe that the attendant regulations are a classic example of gold plating which have imposed unnecessary restrictions on business.

The second difficulty is over-complexity of regulations. There are two obvious examples of that. The first is IR35, which started as a simple proposal to deal with the tax position of various people in the IT industry and has now become so complex that there is significant unrest in the industry over its implementation. The second example is the climate change levy, which ought to have been a simple way of reducing the carbon content in emissions to deal with problems such as the ozone layer but which has become so complex with all the exemptions negotiated by key lobbying organisations that it is in danger of destroying its original purpose.

The third factor, which is not often touched on in Parliament but which is of significant concern to business, is the shifting of costs on to the private sector for the implementation of regulations. One obvious example of that is the working families' tax credit, which has significant cost implications for business. For example, if the regulation is not reformed, the employer will have to pay out a tax credit on pay day from the PAYE money that it normally retains until the 19th of the following month. Instead of paying total net wages of £7,000 on 31st May and sending income tax and national insurance of £3,000 to the Revenue on 19th June, an employer may have to pay out £8,000 on 31st May and send in £2,000 on 19th June. The employer will thus have lost the use of £1,000 for three weeks in implementing an understandable regulation that we supported.

If that cost were not imposed on employers but were switched back to the Department of Social Security, the annual saving to employers, based on the Government's estimate of recurring costs, would be £105 million. That is a practical example of an issue on which we trust that the Bill will bring about change.

The fourth area that requires significant work is obsolete regulations. I trust that all noble Lords agree on that. Our fire regulations were set up in 1940. It does not need a fireman or an expert on the fire industry to realise that the way in which fires were put out in 1940 is likely to be rather different from how they are put out in 2000, so the way in which businesses impose those regulations is also likely to be different. That is another example of the sort of regulations that the Government should be concerned about.

I have gone into considerable detail, because I was struck the other day at a meeting by a comment made by a representative of Dixons. The Conservatives will be particularly interested in that company, as its chairman is one of the party's largest donors. He said that the trouble was that all political parties say that they will do something about the problem because it is a good electioneering slogan but then no party ever does anything about it when it gets into power. I did not ask what effect that would have on Sir Stanley Kalms' donation to the Conservative Party at the next election because I thought that that would be rude, but he made a valid point. All political parties say that they will have a bonfire of regulations but when they get into power they increase the number of regulations without cancelling the ones that already existed.

I do not expect the Minister to answer my detailed points on regulations, which I gave by way of example, but I should like an undertaking that if the Bill is passed, the Government will do something about the myriad regulations that businesses large and small are complaining about. In cruder terms, can he undertake that the Treasury will put its money where the Government's electoral mouth is?

5.55 p.m.

Lord Saatchi

My Lords, the unusually low turnout for this debate has been more than compensated for by the exceptional quality of the contributions. It is a tribute to your Lordships' House that, as the noble Lord, Lord Roll, said, we have heard speeches of great intellectual merit and thoughtfulness. It is a great honour to wind up for the Opposition.

I offer my heartfelt sympathy to the noble Lord, Lord Mitchell, for the blows that have fallen on his family. My father died in May and I experienced similar kindness in your Lordships' House. Like him, I was very touched by it.

I join my noble friend Lord Skidelsky in his congratulations to the noble Lord, Lord Mitchell, on his maiden speech. I, too, thought that it was excellent. The noble Lord has all the qualifications to make excellent progress in your Lordships' House. He went to the same school as my brother and to the same university as me. He also lives in Hampstead, where I was brought up. Those are certainly good auguries.

The noble Lord has been a great success in the IT industry. He referred to the importance of understanding and encouraging information technology, particularly business to business, and the transformations that it can bring to business systems and education to produce true productivity. Those thoughts were echoed by the noble Lord, Lord Newby. His expertise in small business and information technology—both areas in which employment will be created in the future—will be very important in debates in your Lordships' House. I warmly welcome him to the House.

I hope that the noble Lord, Lord Roll, will forgive me if I now enter into what he called the nitty-gritty of our normal parliamentary activity. As I listened to the gracious Speech yesterday, I could not get out of my mind the comments of the noble Lord, Lord Stoddart of Swindon, during our debates on the Transport Bill recently. Addressing the Government Front Bench, he said: it is strange to ask Labour Members of this House to do the exact opposite of what we were told we should do before the election. Some of us have brains. We shall not simply be told one minute that something is wrong and the next minute that it is right".—[Official Report, 27/11/00; col. 1221.] Like the noble Baroness, Lady Jeger, on the same day, he was talking about the privatisation of the air traffic control service. He reminded your Lordships' House that, while in opposition, Labour had flown balloons saying, "Our air is not for sale". Those balloons turned out to be hot air.

That is why the Government's approach to the gracious Speech yesterday reminds me of one day in the Oval Office when President Nixon and Secretary Kissinger were discussing a difficult affair of state. Mr Nixon proposed a solution and Mr Kissinger disapproved of his plan. He said: Mr President, I must remind you of the famous saying: 'You can fool some of the people all of the time and all of the people some of the time, but you can't fool all of the people all of the time'". President Nixon leaned back in his chair. He thought about that very carefully for a moment and then said: Henry, those sound like pretty good odds to me". Today our Government are playing the same odds.

Here I know that I can agree with the spirit, if not all, of what my noble friend Lord Skidelsky said. My relationship with him is strictly pupil-to-master. Therefore, I certainly would not dream of crossing swords with him. But I know that he will share my view, as did Keynes. He said that Keynes' Utopia was, Paradise Regained, whose inhabitants would live like the 'lilies of the field who toil not. neither do they spin'". That is the problem that we face with this Speech.

The right reverend Prelate the Bishop of Portsmouth said that the first priority of economic policy should be—I believe that I quote him correctly—to help the poorest and most vulnerable people in our society. I should like to consider one of those groups: pensioners.

There was no reference in the gracious Speech yesterday to the Government's earlier pledge to uprate pensions and fuel tax by the rate of inflation. There was no apology in the gracious Speech for the fact that the Government, in my opinion, shamelessly used two different definitions of inflation. Pensioners—perhaps some of the poorest and most vulnerable people in our society—ended up with an increase of 1.1 per cent in their income from the Government and fuel users with a 3.4 per cent increase in their tax payments to the Government. As your Lordships know, that ploy fell apart because pensioners and truck drivers have brains too.

As was said earlier by, I believe, the noble Earl, Lord Russell, some scrounging and fiddling have taken place in relation to pensioners. The noble Lord, Lord Harris of High Cross, asked how many pensioners would be prepared to save for the benefit of the Chancellor. He spoke of the danger to the health of our democracy—the greatest danger being the corruption of vote buying. However, let us consider the manner in which the Government have gone about what he might call "vote buying" in relation to pensioners. I believe that the plan was to compensate pensioners for the little tricks with the inflation rate which I have just described. The noble Baroness, Lady Hollis, said in her opening remarks that the plan was to make sure that our pensioners never fall behind again.

Baroness Hollis of Heigham

My Lords, I referred to the poorest pensioners and the earnings-related aspect of the minimum income guarantee.

Lord Saatchi

My Lords, I shall see whether the point still relates to the poorest pensioners. I am sure that it does. I believe that the Government's solution to the poorest pensioners is what the noble Baroness called "MIG"; that is, the minimum income guarantee. I do not know whether any of your Lordships have ever attempted to fill in the claim form for minimum income guarantee. It consists of 40 pages. The last page—Part 18—asks "What happens next?". I shall tell your Lordships what happens next. Half a million of those vulnerable people are eligible for this income support. However, because of the complexity of the document, so far only 23,000 have attempted the feat of filling in the form.

Let us consider an issue mentioned by the noble Lord, Lord Razzall—the climate change levy, with which Parliament has been exercised for the past year. The noble Lord said that the original purpose of the levy was perhaps becoming lost in the fog of its complexity. We recall that the climate change levy was originally said by the Government to be a revenue neutral swap between a new energy tax and a new national insurance credit.

The Prime Minister was crystal clear on that point when he said: Any money raised by the climate change levy is given back to industry through cuts in national insurance costs". The Minister, the noble Lord, Lord McIntosh, who I am pleased to see has come into the Chamber, said much the same. He said that the NIC cut would be an "offsetting cut".

However, some energy consumers have brains too. They may be the recipients of a document from London Electricity PLC which contains a helpful climate change calculator. London Electricity says that it will help one to assess the impact of the forthcoming climate change levy on one's budget. I quote from the document: From 1 April next year, typical electricity bills will rise by about 10 per cent … This means that, for the first time in almost a decade, energy costs will increase and it could leave a dent in your accounts. From London Electricity's point of view, however— this is the real point— it must be stressed that no part of the levy is retained by the company. Every penny collected by us is passed on directly to Whitehall". That is hardly a neutral act by the Government.

I should like to consider perhaps the most important of all the pledges made by the Government—in the area of taxation. How marvellous to have been an >FT reader in September 1995 and to have learned over bacon and eggs that Mr Blair had, no plans to increase tax at all". How wonderful to have been in the Guildhall in September 1996 to hear the future Prime Minister say: We want people to pay lower taxes". And how reassuring to have been a Member of your Lordships' House in July this year when the Minister told us that, taxes are falling at the moment". We all know that politics is a rough game and this is certainly what the noble Lord, Lord Roll, would call the "nitty-gritty". However, when Ministers look in the mirror in the morning or look up at the public galleries in your Lordships' House, how do they square those statements with Table B8 on page 175 of the Government's own November Pre-Budget Report statement which shows in black and white that the tax burden, which the Minister now prefers to call "net taxes and social security contributions", is rising this year from 36.9 to 37.3 per cent? That is shown in black and white in the Government's own document. When the Minister comes to reply today, will he withdraw that statement made in July from the Government Front Bench? Will he correct it or, better still, apologise for it?

What has made all this work so well for the Government is that they have—we must give them credit for it—implemented their plan impeccably. First, they said that they would, give families the lowest direct tax burden for thirty years", banking on the fact that no one knew the difference between direct and indirect taxes. When that did not work, Ministers said (I quote the Treasury Minister): We should not overestimate the importance of the tax burden". When that failed, they simply abolished the term "tax burden" from their vocabulary.

As did the noble Lord, Lord Desai, who I am sorry to see is not here, would it not be more honest to say simply, "We are not the party of low taxation"? Would that not be easier and relieve the Benches opposite of the tortuous means and mental anguish that they put themselves through in trying to prove that the opposite of what is true is true?

Lord Haskel

My Lords, I thank the noble Lord for giving way. I am a long-standing friend of the noble Lord, Lord Desai. I believe that if he were here he would say that he pointed out during his speech that he was a well known rebel in the Labour Party.

Lord Saatchi

My Lords, today is the first day of the Nice Summit, to which my noble friend Lord Higgins referred earlier. We can expect breathless communiques on how our lads fought them on the beaches of the Baie des Anges and how the Promenade des Anglais was littered with the bodies of the tax harmonisers. But, as always with this Government, actions speak louder than words. The plain fact is that, according to PricewaterhouseCooper, it makes no difference whatever whether the Government win the battle at Nice on taxation today and over the next few days because they have already lost the war.

Britain has already lost two-thirds of the tax gap advantage that existed between the UK and Euroland when this Government took office. When they took office, we had the advantage of a 6 per cent lower tax burden. Today, only three years later, it is 2 per cent.

But where brains are perhaps most needed is to decode the opening sentence of the gracious Speech, to which the noble Lord, Lord Roll, referred. It talks about a stable economy and so on. Other noble Lords have also referred to that opening sentence. The noble Baroness, Lady Hollis, referred to a strong and dynamic economy. The noble Lord, Lord Desai, said that the firm discipline on fiscal policy had paid off. The noble Lord, Lord Haskel, also spoke of the strong economy.

Noble Lords have used those phrases, but what are they really getting at? At their heart, they must mean that the Government are presiding over strong public finances, and I refer to the £46 billion of budget surpluses over the next four years described in this document.

Where have those strong finances come from? Is it because of the strong economy to which some noble Lords have referred or because of the excellent macro-economic management to which the noble Lord, Lord Roll, referred? No, it is not that, because trend growth of GDP is only 2.25 per cent, which is half as fast as America and slower even than Euroland.

But out of that modestly growing economy, there is one item which is miraculously growing much more rapidly; namely, government tax receipts, which are growing by over 6 per cent per year. This is the third year in a row in which government tax receipts are growing nearly three times as fast as people's earnings. That is how the economic miracle of the so-called strong public finances has actually come about.

As my noble friend Lord Skidelsky said, the Government have achieved that by taking full advantage of the complexity of the tax system—what he described as the constantly changing and unpredictable nature of the tax regime. There is not, for this Government, anything as simple as the cards with a plain and clear background which my noble friend Lady Gardner of Parkes described. That would be far too simple.

As the figures proved on the contrast between government tax receipts and people's earnings, no citizen, however intelligent, can match the massed ranks of No. 10, No. 11, the Treasury and Millbank—one man against the legions of Rome.

The impossibility was summed up by the opening speech of the noble Baroness, Lady Hollis. I made a quick calculation. The noble Baroness gave us 52 statistical facts in 20 minutes. That is one economic statistic every 30 seconds. Who can keep up with that?

That takes me to my final point. There was one great omission from the gracious Speech which we greatly regret; namely, the absence of any reference to the long endeavour by my noble and learned friend Lord Howe of Aberavon and his tax rewrite group. That has been a tremendous personal crusade on his part to bring more simplicity and transparency to tax legislation. That has now borne fruit in the form of a rewritten capital allowances Bill. But what a pity that in the gracious Speech there is no reference to that, nor to any other contribution by your Lordships' House in relation to the nation's economic affairs.

I touch on a point with which I have perhaps bored your Lordships before, but in relation to economic matters your Lordships must be satisfied with an hour or so of debate today and grateful for another hour or so in July on the Finance Bill, but for us that will be it, even though, as my noble friend Lord Higgins said, the House of Commons has all but given up on any close scrutiny beyond a Second Reading debate. What a pity.

6.15 p.m.

Lord Sainsbury of Turville

My Lords, first, I congratulate my noble friend Lord Mitchell on his outstanding maiden speech. The fact that he went to the same business school as I did in no way affects my judgment on that matter. Those of us who followed his enterprising and highly successful business career are in no way surprised by the excellence of his speech. But it is always a pleasure to hear an excellent maiden speech from someone who knows a lot about small business and can speak with real experience. I know that my noble friend will champion vigorously the cause of small businesses.

I very much agree with him that the grotesque over-valuation of dot.com companies last year should in no way confuse the fact that the Internet change that we are seeing will profoundly affect industry; that business-to-business Internet services will significantly drive down costs for business; and that computers will have a major and beneficial effect on education.

I was surprised that the noble Lord, Lord Saatchi, complained about the limited amount of time that we have to debate economic matters because, if he turns round and looks at the Benches behind him, he will see that when there is an opportunity to do so there is a striking lack of people sitting there waiting to jump to their feet in order to speak on that subject.

I turn to the current economic situation. Since coming to power, this Government have steered a course of economic stability. We inherited an economy with strong inflationary pressures. The Government put the economy back on a stable footing. We did so for a purpose. On those stable foundations, we are working to build a Britain where there is opportunity and security for all. Our aim is to build a fair society and a knowledge-based economy and, as my noble friend Lord Haskel said, social justice and the economy working together with industry and government sharing a productive relationship.

The Government will continue to pursue their central economic objective of high and stable levels of growth and employment. It is because we have taken the trouble to build the long-term foundations for success and have resisted the short-termism which would threaten stability that the economy will expand by about 3 per cent this year. Independent forecasts predict continued growth of 2.7 per cent next year.

I believe that the record is extremely good and the fact that we have praise from the noble Lord, Lord Roll, is praise indeed and is extremely gratifying.

Inflation will continue to meet its target of 2.5 per cent next year. Productivity growth is expected to strengthen in 2001–02 at about 3 per cent for the whole economy and 5 per cent in relation to manufacturing. Our exports to Europe are up almost 10 per cent on those a year earlier.

The noble Lord, Lord Higgins, said that all that could really be traced back to the previous government. I must point out to him that over the past three-and-a-half years, again and again, Members on the Opposition Benches have pointed to the action being taken by the Government and said that that would certainly lead to ruin for the economy. Again and again, they have been proved wrong. They cannot have it both ways. You cannot predict that what the Government are doing will lead to ruin and then lay claim to the fact that all the good in the economy goes back to the previous government.

The fact is that the Government inherited a mess in relation to public finances and the national debt had doubled. Borrowing was £28 billion.

I take the question of the independence of the Bank of England. Was that good or not? The Opposition have now accepted that it is good. Therefore, one must assume that that was an action of the Government which has had a beneficial impact on the economy.

I turn to the comments of the noble Earl, Lord Russell. We do not claim, and would not claim, that all of that is due to the Government. We are perfectly happy to give some credit to the previous government. However, looking at the record of this Government, over this period, and comparing it with the boom and bust of the previous government, there appears to be at least a modest step forward in the management of the economy.

The economic stability that we have achieved provides a firm foundation for businesses to plan ahead and invest. At the same time we have introduced a fiscal environment that encourages business to invest, and we have maintained lower taxes than any major industrial country, apart from Japan and the USA, and OECD figures show that we have lower income taxes, business taxes and VAT rates than any other European economy.

We have cut the corporation tax rate to its lowest ever level and introduced cuts in capital gains tax to create the most favourable environment that Britain has ever seen for encouraging entrepreneurs, rewarding risk-taking and promoting wider share ownership among employees.

I was surprised at the lack of historical memory shown by the noble Lord, Lord Skidelsky, when he said that it was surprising that there had been an increase in the tax rate under this Government. He appears to have forgotten that under Margaret Thatcher's first term of office the tax rate increased from 33.3 per cent to 39.1 per cent.

Because of the stability that we have introduced into the economy, which is exactly what business wants, we have a higher level of business investment as a share of our economy than at any time in 40 years. UK business expenditure on research and development, as a proportion of GDP, has increased for the second year running. Last year business expenditure on R&D increased by £70 million in real terms on 1998 which is the largest year-on-year increase since 1986. We continue to attract record levels of inward investment, with more companies than ever before choosing to locate in the UK last year.

I agree with the noble Lord, Lord Newby, about the importance of investment for productivity. The great difficulty is how one stimulates that investment. I believe that macro—economic stability is absolutely fundamental in achieving investment as it is in achieving R&D expenditure. The fact that both of those indicators are moving in the right direction shows that macro-economic stability is beginning to have an impact. If that can be maintained in the future, we shall begin to see it coming through in investment in R&D and in the long-term in increased productivity.

We now have more people in work than ever before, rising prosperity and the basis for sustained economic growth. However, we must ensure that we spread the fruits of that economic progress to all parts of the country and to all people within Britain. Above all, we need to ensure that our regions are equipped to compete in the knowledge economy.

In these debates what is not said is often as interesting as what is said. I was surprised that there was no mention from the Opposition Benches of regional policy at all. On the other hand, we have set up the Regional Development Agencies to raise economic growth and competitiveness in our regions. We listen to business. That is why we are increasing the RDA's budgets by £500 million to £1.7 billion by 2003–04, including £100 million over the next two years to ensure that all regions can improve their performance on innovation and to support clusters of industry.

The noble Lord, Lord Newby, raised the relationship of the DTI and the DETR on this matter. A classic example of good, joined-up government, is that we work together on the management of the RDAs with great success.

Sadly, the party opposite appears not to be interested in the regions or in spreading wealth across the nation at all. Despite local businesses supporting them, despite the CBI supporting them, despite all their early successes, the Conservatives would abolish the Regional Development Agencies. Apparently, they have no regional policy, except abandoning large parts of the country to slow or no growth.

In the knowledge economy, more than at any time before, science and technology will provide the new products, services and processes which create economic growth. That is why this Government have made major steps forward in supporting the science base. But in the knowledge economy it is not enough to generate research; we also have to make the most of that research and turn ideas into products that can improve our lives.

We have already introduced incentives for universities to exploit the knowledge that their science generates. The University Challenge Fund is helping over 30 British universities to turn their research into real business opportunities; for example, the universities of Leeds, Sheffield and York won a £4.5 million grant to back 100 new high-tech companies arising from the research in the universities. Already government investment of £25 million has levered in a further £40 million, yet the parts opposite would scrap the University Challenge Fund as part of their search for cost savings.

I shall now turn to an issue raised by many noble Lords in the debate, that of regulation. The noble Lord, Lord Higgins, raised the old chestnut that regulations introduced by this Government have cost £10 billion. That is a clear figure that has been circulated many times. I believe that, quite deliberately, it confuses the costs of entitlements and benefits with the administrative burden of delivering them—the red tape. Our policies for a fair wage, decent holiday entitlement and a safe workplace have cost about £5.04 billion. The vast majority of that figure—over four-fifths—has been spent on the national minimum wage and the working time regulation. That is not red tape. It is about building a fair, healthy and secure workplace and society, which is precisely what this Government were elected to do.

The question is which of our improvements to the working conditions of men and women would the party opposite cut: the national minimum wage, entitlement to four-weeks paid holiday, or new rights for part-time workers? We await their answer with interest. In fact, the cost of introducing our proposals has been competitive. The regulatory impact assessment shows that the cost of implementing our fairness agenda is in the region of £10 million to £14 million per year. In our view, and in the view of employees up and down the country, that is money well spent. It amounts to less than 50p per worker per year.

To show our commitment to cut burdensome red tape, we are introducing a regulatory reform Bill to increase the effectiveness of the power to reduce regulatory burdens by removing inappropriate and over-complex regulation. I can assure the noble Lord, Lord Razzall, that that will lead to action on the areas clearly stated in terms of bringing together large amounts of legislation in key areas that can be rationalised. Earlier this year we raised the statutory audit threshold from £350,000 to £1 million, relieving up to 150,000 small companies from statutory audit, with potential savings of up to £180 million a year and a fortnight ago the Prime Minister announced a series of measures to cut back unnecessary business regulation.

I turn to taxation—

Lord Higgins

My Lords, before the Minister leaves that point, I do not recall referring to a sum of £10 billion. I quoted the CBI figure of £12.5 billion. On top of that they complained about the increase of some £5 billion a year in taxation. If the Minister looks at the other matters, of course, what he says is true. There are two separate matters: one is the changes that have been made on various provisions in regard to the minimum wage and so on; but on top of that there is the provision of administrative costs and genuine red tape that we have debated time and time again on the welfare bill. That is certainly the case.

Lord Sainsbury of Turville

My Lords, I listened carefully to the points that the noble Lord made in his speech. He talked of the £10 billion to £12 billion. Is there any conceivable way in which one can add up the basic figures—the regulatory impact studies concerning the administration of any of our legislation—and arrive at any figure that is remotely comparable to that? The idea that —12 billion is the cost of introducing the new regulations is impossible.

Lord Higgins

My Lords, I thought I made it clear a moment ago that they are two separate things. For example, the CBI complains about the additional cost of various changes the Government made as being £12.5 billion. I do not suggest that that is the figure for the red tape. The red tape is on top of that and there are a whole series of ways in which the Government are imposing extra burdens. I cannot intervene at great length, but if the Minister looks at the news release from the CBI he will see that the effect on lost profit margins is in reduced staff and relocation of business outside the UK.

Lord Sainsbury of Turville

My Lords, that is during a period when there has been greater inward investment than ever before during our history. If the noble Lord is saying that the figure of £10 billion is not the cost of the red tape but consists largely of benefits, I accept what he says. I accept too the point that if we want to call it a burden on industry, we can so call it. I was asking him then to say what he would do about removing that burden from industry, which we on this side of the House believe to be of major benefit to employees. If one calls it a burden and deplores it, one must commit oneself to saying how that burden can be removed and what action can be taken. That was my point.

I move on to taxation, the other subject which arose a number of times during the debate. This Government believe that hard-working families should receive all the help they need. We have cut the burden of taxation. By April 2001 households will, on average, be £460 a year better off. Families with children will be on average £850 a year better off while the direct tax burden on a single-earner family will be at its lowest level since 1972. In short, the tax burden was lower last year, is lower this year, and will be lower next year than under the previous government's plans.

This Government will not repeat the mistakes of boom and bust. Unfortunately, all the signs are that the party opposite has not learnt that lesson. As we were reminded, the Leader of the Opposition announced recently a plan for an uncosted £8 billion worth of tax cuts. The noble Lord, Lord Skidelsky, described it as a mouse dressed up as a mountain. I say it is not even a mouse; it is a dead mouse in that he set out to say how the party opposite would achieve the first £5 billion worth of savings. In his speech Mr. Hague grandly declared, "We have looked at the books and found billions of pounds of unnecessary spending". But the figures look to me not so much as being based on hard hours of looking at the figures, but rather like the sort of figures put together by young researchers in a pub after a few drinks.

The Conservative Party wants to privatise the industrial injuries benefit. That means that the cost will be transferred to industry. It will abolish the Best Value in Local Government Scheme, which is delivering savings to local authorities throughout the country. It hopes to save £1.8 billion in government costs by not replacing anyone who leaves the Civil Service. Last year that would have meant a 10 per cent cut in Benefits Agency staff; 2,800 fewer staff in the Prison Service; and nearly 6,000 less personnel in the Ministry of Defence and agencies. It will slash the New Deal, which has cut youth unemployment by 70 per cent and saved millions in benefits payments. And best, and my favourite, it hopes to save £205 million by abolishing regional assemblies which do not even exist. Those are not sensible, carefully worked-out savings in government expenditure. Of course we still have the other £3 billion worth that must be found—presumably more poring over the figures at night or during another visit to the pub.

Other interventions came from the noble Lords, Lord Harris of High Cross and Lord Skidelsky. They seemed to adopt essentially a theological position on the amounts of taxation and the amount the public sector should take from the economy. We should look at what people want from public service and the money needed effectively to provide it. That includes looking at the cost of achieving social justice.

The Lord Bishop of Portsmouth

My Lords, perhaps I can gently point out that theology involves what people want as well.

Lord Sainsbury of Turville

My Lords, I stand rebuked and withdraw that remark.

The Lord Bishop of Portsmouth

My Lords, perhaps the Minister's remark was being more conceptual.

Lord Sainsbury of Turville

My Lords, I withdraw the remark, although I hope people understood my meaning.

As my noble friend Lord Haskel said, we want to achieve both social justice and prosperity. Prosperity achieved on the basis of the impoverishment of some is Intolerable, just as the achievement of equality, if it leads to economic stagnation, is not desirable. We totally agree with the noble Lord, Lord Roll, about the difficulty of reducing poverty and the role that education can play in that.

I turn to two points made by the noble Lord, Lord Higgins. The first concerns the social security fraud Bill. We have taken powers in previous Bills to tackle fraud but need to do more. That is why the matter has been referred to previously in government pronouncements and is referred to again. We tackled fraud on our first day in office, and we have registered the first fall in fraud levels since regular measurement began.

Earl Russell

My Lords, I am grateful to the Minister for giving way. Will he slightly revise his statement? A fall in "recorded" fraud might be a better description.

Lord Sainsbury of Turville

My Lords, by definition that has to be right. I am not certain it changes the argument but I accept that that is the position.

The noble Lord, Lord Higgins, also made a point about means testing. The problem in that regard is that inequality grew so severely under the last government that flat-rate increases—for example, pensions for all—mean that three-quarters of those who do not need it receive it, and the quarter that does, does not receive enough. That is why we need to target while at the same time removing stigma and hence fraud.

The noble Earl, Lord Russell, raised the issue of lone parents and the question of substitution. Research on the New Deal for lone parents has shown, even including possible substitution, that an effective difference has been made. The noble Earl believes that the right to public benefit is a private right and private choice, without recognising the responsibility that goes with it. He believes it is wrong to encourage lone parents into work, even though all the research shows that it is in the long-term benefit of children.

Earl Russell

My Lords, I have absolutely no objection whatever to helping those lone parents who wish to work to do so. It is the use of authority that concerns me.

Lord Sainsbury of Turville

My Lords, I may have misunderstood the noble Earl. I believe he said that it was not the position of the state to "encourage" lone parents into work. If he believes it is the state's position, then I withdraw my remarks. But I believe the noble Earl said it was not the state's role to do that.

Earl Russell

My Lords, that is correct; but it is the state's position to enable. What the lone parent then chooses to do is entirely his or her own affair.

Lord Sainsbury of Turville

My Lords, that is simply playing with words. If one encourages, one takes a view to persuade people to do something. That is different from saying it is up to the individual to make the choice. One is taking a more active role.

The same is true as regards the long-term benefit of children and disabled people who as a result of personal capacity assessment have an ability to do some work. We disagree with the position the noble Earl takes. We believe that rights and responsibilities run together. Both groups need help and support from personal adviser systems if they are to rejoin the market.

The noble Earl asked a specific question about the social security fraud Bill. It will provide for a mandatory withdrawal or reduction of certain benefits when someone is twice convicted of benefits fraud. The sanction will last for 13 weeks. During the period special payments will be available to prevent hardship for those with no other means. These payments will be at the same level as is already available to those whose benefit has been reduced for failing to take up available work.

The noble Baroness, Lady Gardner of Parkes, asked about identity cards. It is a large subject which involves a great deal of emotion so I shall make only two comments. First, any move towards a national identity card would need careful consideration so as to avoid the problems we see in the cards issued by some of our European neighbours. Staff in some of our social security offices, through bitter experience, have had to become expert in the many ways in which such documents can be forged or counterfeited. Secondly, I hope that it will give the noble Baroness comfort to learn that, like Australia, we have a tax and benefit number; it is the national insurance number. One of the changes we made to prevent fraud was to insist on the production of that number before benefit was paid. That is a move in the right direction.

I turn to the point made by the noble Lord, Lord Newby, about the Universal Bank. Its services are intended to address financial exclusion head on, providing a range of products with broad appeal. Negotiations are now taking place and therefore it would not be appropriate for me to discuss their details.

The noble Lord, Lord Razzall, asked about consumer protection, commenting that there is no related Bill in the Queen's Speech. Following last year's consumer White Paper, we have been working on taking forward proposals, a number of which can be put in place without legislation.

The noble Lord also asked about the working families' tax credit. That is central to the Government's policy of enhancing work incentives and supporting working families. Any extra work for employers has been kept to a minimum thanks to consultation with employers and payroll software developments since May 1998. But fundamental to that scheme is paying benefits for low-paid workers when they go into work rather than as a family credit.

Finally, I turn to the remarks made by the noble Lord, Lord Saatchi, about pensions. In April they will rise by £5 and £8 for a couple, which is far more than IPI and the earnings link and is the biggest increase since 1975.

The noble Lord also asked about the level of taxation. I am not sure where the figures quoted by the noble Lord, Lord Skidelsky, come from, but the Pre-Budget Report shows 36.9 per cent for 1999–2000, which is a fall from the 37 per cent in the previous year. On current costings, allowing for tax changes, subject to consultation the tax burden will not rise next year and will fall thereafter. The increase this year reflects rising income tax as a result of higher employment and earnings growth, higher oil prices and higher stamp duty receipts. All those levels are lower than they would have been under the plans published by the previous government. There is no secret that the last Budget of the previous government was constructed to have the lowest tax charge prior to the Budget and the tax increases were planned to come into effect after the Budget. That was a shrewd and clever move, but one should have no doubt that that was what was done.

In conclusion, in May 1997 the country was heavily in debt. We were spending more on interest payments than we were on our entire schools programme. Inflation was returning. Business confidence had been battered by the recession. The productivity gap with our competitors was growing and hard-working families had been hurt by high interest rates, unemployment and house repossessions.

We took action to lock in low inflation and to cut government debt, introducing new fiscal spending rules which keep government to tight financial discipline. We made the Bank of England independent to ensure that interest rate decisions are taken in the best long-term interests of the economy, not for short-term political considerations.

The deficit has been eliminated. Government borrowing has been reduced by £44 billion in total since the election. Inflation is at its lowest level for 30 years. We have a higher level of business investment as a share of our economy than at any time in 40 years. Long-term interest rates are around the lowest for 30 years.

Not long ago we were told by various members of the party opposite of a, recession made in Downing Street", and of a collapse in our economic prospects. In fact, the economy is growing steadily and living standards are rising. The average mortgage is 6.9 per cent—not 10 or 15 per cent—a saving of £160 a month for the average mortgage holder.

There are more than 1.1 million more men and women in work than in 1997. Claimant unemployment is now at its lowest rate since October 1975. We have helped people get back to work through the New Deal. This is the most ambitious programme of employment and retraining ever. We have now reached our target of getting 250,000 young people into work through the New Deal.

It is a pity that the noble Lord, Lord Skidelsky, is no longer in his seat because I would have reminded him of the remark of Lord Keynes, of which I am sure he is well aware from his researches—to, look after unemployment, and the budget will look after itself". That is exactly what we have done.

When we came into office in 1997, 42p of every pound went on repaying interest on the national debt, unemployment and social security spending. Today, for every pound of public expenditure just 17p goes to fund debt interest, unemployment benefit and social security spending. We have achieved this by putting public finances on a sound footing and by helping people off benefit and into work. As a result of that, with the Comprehensive Spending Review plans announced in July, we are now making the largest investment in Britain's public services for more than 20 years.

That is also why we are able to take action to tackle child poverty. The Government's additional help for families with children will reach around £6 billion extra in the last year of this Parliament. And while child support for a family on average earnings with two children fell by 5 per cent in real terms between 1979 and 1997, it will rise by 50 per cent this Parliament.

Instead of the vicious circle of rising inflation and unemployment which dogged much of Britain's post-war history, we are now in a virtuous circle where rising employment is cutting the costs of economic failure, freeing up public money for investment in the infrastructure and services which this country so badly needs. This means that we can invest without risking the stability that we have built. We do not proclaim that we have achieved economic miracles but we believe that we have made a start in the right direction, on which we shall continue to build, to raise growth and living standards further in every part of the country, to eradicate child poverty and to provide opportunity and security for everyone. This Queen's Speech shows a Labour Government fulfilling their manifesto commitments and delivering the nation's priorities, and I commend it to the House.

Baroness Farrington of Ribbleton

My Lords, on behalf of my noble friend Lady Blackstone, I beg to move that the debate be now adjourned until Monday next.

Moved, That the debate be now adjourned until Monday next.—(Baroness Farrington of Ribbleton.)

On Question, Motion agreed to, and debate adjourned accordingly until Monday next.

House adjourned at ten minutes before seven o'clock.